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Core of Apple's new iPhone?
Analysts say Woburn company's device to be a key part of long-awaited gadget
Boston Globe |  January 3, 2007
Carolyn Y. Johnson, Globe Staff

According to the 2006 Index of the Massachusetts Economy, released by the Massachusetts Technology Collaborative, software and communication services jobs and computer and communication hardware jobs together account for 173,000 positions in the state.

WOBURN -- The buzz around Apple's much-hyped music phone has touched a local company that makes integrated circuits and chips.

Apple's new gadget, dubbed the iPhone, has been all rumor and secrecy to date. No one knows its specifications, its real name, or whether it will indeed be unveiled at Macworld 2007 in San Francisco next week.

The anticipation, however, has cast a spotlight on Skyworks Solutions Inc., a Woburn semiconductor company that analysts say will manufacture a key component of the phone.

Skyworks is a major manufacturer of "front-end modules" -- devices few consumers have heard of, but which most carry in their pockets. Such a chip amplifies and filters voice and data signals, connecting the phone to the network and making it more than just a hand-held computer.

Two analysts said that Skyworks will make the $2 to $3 front-end modules for Apple. Skyworks officials declined to comment.

"We became very confident that Skyworks has earned the front-end module for the new iPhone," said Cody Acree , managing director at Stifel Nicolaus, who rates the stock "buy." Skyworks makes 40 percent of the devices worldwide; RF Micro Devices of Greensboro, N.C., has a similar market share. "To have one of two players pick up something as high-profile as what Apple could be is significant."

Edward Snyder, a principal analyst at Charter Equity Research, was skeptical of the benefits to Skyworks, though.

"They're definitely involved" with Apple's phone, he said, but it is "not a huge win for Skyworks because they've got much bigger projects" with major handset makers that sell tens of millions more phones than Apple is likely to sell in its first year.

In mid-December, Skyworks stock closed at $7.86, near its 52-week-high, after Acree said the company could benefit from its deal with Apple, but within a few days dropped to around $7 a share. The stock was at $7.08 on Friday.

The speculation surrounding Skyworks' relationship with the company that rules the digital music industry also has drawn attention to the wireless industry's behind-the-scenes players: companies that make the software and chips that power the latest flashy phones. They play a key role in the state's economy.

Massachusetts has been "a telecom network hub," said Mark Horan, executive director of the Massachusetts Network Communications Council.

According to the 2006 Index of the Massachusetts Economy, released by the Massachusetts Technology Collaborative, software and communication services jobs and computer and communication hardware jobs together account for 173,000 positions in the state.

The state plays an important part for "the underpinnings of cellphone systems -- security, network infrastructure, sometimes content delivery," Horan said, citing companies like Acme Packet in Burlington, Airvana Inc. in Chelmsford, and Starent Networks Corp. in Tewksbury, which work on different aspects of wireless networks.

"Massachusetts traditionally was very strong in network communications, so there's a natural movement toward helping fuel the growth in wireless technologies," he said.

Skyworks has 500 employees in Massachusetts and 3,600 workers total. Aldrich said the company had $800 million in sales in 2006.

At its plant in Woburn, workers don spacesuit-like protective gear before going to work on delicate gallium arsenide wafers. About half a million chips are produced every day, eventually making their way into sleek handsets and other wireless products.

Few people think about the integrated circuits, switches, amplifiers, and radios that Skyworks manufactures. But over the years, crucial innovations in microchip technology have let cellphones become smaller and do more than just make calls.

"The thing about the phone today is it is an MP3 player, a radio, a camera; used for voice, video, Web-browsing," said Skyworks's chief executive and president, David Aldrich. "You've got to do it all and live on a battery that lives for a few hours or days."

As the circuitry has gotten more complicated, companies like Skyworks have found a way to bundle ever more functions in a single package. Instead of 100 parts made by 100 companies, Skyworks can sell the handset manufacturers a single part, for a few dollars.

"We think this market is going to continue to grow double digits a year," Aldrich said.

"If you need to do something wirelessly, we have an opportunity."