Infineon (IFX) to Benefit from 3G iPhone Sales ~ market folly

Thursday, July 10, 2008

Infineon (IFX) to Benefit from 3G iPhone Sales

Let me preface this by saying I have absolutely no idea how much this will affect Infineon's (IFX) bottom line, but I would imagine it would have a solid impact. Everyone is expecting the 3G iPhone to be a big hit worldwide, which obviously benefits Apple (AAPL). But, there might be some other ways to play it if you're interested. With a little bit of digging today, I was able to find someone who had already disassembled the 3g iPhone (in New Zealand no less... since it's already out there). The people over at ifixit have literally taken apart the entire new iPhone to find all its components. Now, while there are still a few unidentified pieces in there, they have managed to identify the vast majority of components. And, I immediately noticed something: the 3g iPhone has numerous Infineon components. Again, let me reiterate that I am not sure exactly how much this will impact Infineon's bottom line, but it is obviously a positive for them.

The Infineon components can be found on the iPhone's logic board. As of right now, the team at ifixit have identified 3 chips as Infineon chips. And, there are rumors that 2 additional unidentified as of yet chips are from Infineon as well. They write that the identified Infineon chips include:

- "The largest chip in the top left corner is an Infineon 337S3394 WEDGE baseband."

- "Small chip to the right of the NOR: Infineon BGA736 (Tri-Band HSDPA LNA)"

- "The chip in the top middle is SMP 3i 6820, Infineon SM-Power3i. From Infineon: the part is 'optimized to support modem and data card applications based upon X-GOLD208 and X-GOLD 608, with features ranging from EDGE up to 3G and HSDPA.' "

Then, the 2 unidentified chips are believed to be the following Infineon components:

- "SP836175 G0822 337S3394 (rumored to be an Infineon baseband)"

- "338S03532Z 60814 (rumored to be an Infineon RF transceiver)"

(click to enlarge)

So, there are for sure 3 Infineon chips in the 3g iPhone, and possibly as many as 5. Obviously this should boost Infineon's revenue (and their stock as well). And, I noticed something interesting today. Infineon stock (IFX) saw very heavy buying on weakness today. I've talked about buying on weakness before and basically its a metric tracked by the Wall Street Journal which shows stocks that are down for the day but have seen the largest inflow of cash. IFX was #3 on that list today. Hmmmm, I wonder why? /End sarcasm. Not to mention, the stock is up around 2% after hours. I really don't think this news is mainstream yet. And, I really think that the buying today was by those people really paying close attention to the fact that the iPhone is technically released 'early' in the eastern half of the world and has already been disassembled. Seen below is a screenshot of the top half of today's buying on weakness list. You can check out the Wall Street Journal daily updated Buying on Weakness list here.

(click to enlarge)

The iPhone does not come out in the USA until tomorrow (the 11th), but the phone has already been released in the eastern half of the world. And, the guys down in New Zealand wasted no time disassembling the iPhone to find out what's inside. Clearly some people have noticed what I have: Infineon parts are all over the iPhone. You would think that IFX trades higher once this information hits the mainstream. Beforehand, the 3g iPhone components were a mystery. You could make logical guesses, but there was no way of knowing for sure. But, now that the information is public, there are a few stocks poised to benefit. And, Infineon (IFX) clearly leads the pack.

If I buy this name at all it will simply be for a trade and nothing more. I don't consider this news to be mainstream yet, but you never know. This information could already by completely priced into the stock. Although their component presence in the iPhone is obviously bullish for the company, they still operate in the very competitive chip space, where I don't necessarily want to invest. So, the fact that they have numerous chips in the iPhone is alone not enough reason for me to invest in this name. For now, its simply a trading vehicle.

You can check out ifixit's entire iPhone disassembly here.