Cirrus Logic shares rise on Apple iPhone, other devices dropping 3.5mm headphone jacks

Shares of Apple audio parts supplier Cirrus Logic spiked in after-hours trading on Wednesday night as the company not only beat quarterly forecasts, but implied that it stands to benefit from Apple's "iPhone 7" and other smartphones ditching 3.5-millimeter headphone jacks in favor of USB and Bluetooth.

Cirrus is poised to generate more revenue per phone sold with all-digital audio, according to analysts quoted by Barron's. In a Wednesday results call, CEO Jason Rhode noted that some phones have already switched over to USB-C, either bundling or selling compatible headsets and adapters. This is despite current USB-C audio technology being "clumsy," something he expects to be resolved in the next six to 12 months.

"I think we're extremely well-positioned to capitalize on that," Rhode commented. Apple uses a proprietary connector format based on USB, called Lightning.

Needham analyst Rajvindra Gill linked Cirrus' quarterly results to "stabilizing Apple iPhone 7 units combined with a ~40% dollar content increase," nevertheless warning that the second half of 2016 could be jeopardized by "potential sell-through risks at Apple." That's presumably a reference to predictions that the "iPhone 7" will mostly be another interim update, with a faster processor and better camera technology, rather than a significant redesign.

Gill suggested that Apple — and by extension Cirrus — will do well with next year's iPhone, which may finally bring a major redesign. He predicted that Apple should see sales rise year-over-year, while Cirrus may make $7 per phone versus $5.

Public reaction to the idea of losing 3.5mm headphone jacks has often been negative, since the format is still an industry standard and many people have headphones and speakers that will suddenly be incompatible without an adapter.

9 Comments

cnocbui 3612 comments · 17 Years

About 8 years ago

If Cirrus say they will be making more money then that implies that either Apple will be making less or consumers will have to pay more. Not hard to predict which of those two will eventuate.

h2p 335 comments · 15 Years

I hear what you're saying and it may be true to some extent. And the article also points to Cirrus making More components per phone which equals more money per phone. I expect prices to stay consistent.

boeyc15 986 comments · 14 Years

5-7 bucks per phone... sizeable chunk!.

Regarding removing 3.5 and using just the lighting connection-- IMO- if it provides demonstrable better audio with everyday ear buds etc --- begrudgingly ... ok. But if its just purely a supposed space saving move... ugggh.

quinney 2527 comments · 18 Years

cnocbui said:

If Cirrus say they will be making more money then that implies that either Apple will be making less or consumers will have to pay more. Not hard to predict which of those two will eventuate.

It might imply that Cirrus will sell $1.00 worth of parts, rather than $.50 worth, and Apple will eliminate $3.00 worth of parts that were needed to support the old audio jack.
Cirrus, Apple, and consumers might all benefit. The parts suppliers who made the analog audio jack and related parts are the ones who will lose.

sflocal 6135 comments · 16 Years

boeyc15 said:

5-7 bucks per phone... sizeable chunk!.
Regarding removing 3.5 and using just the lighting connection-- IMO- if it provides demonstrable better audio with everyday ear buds etc --- begrudgingly ... ok. But if its just purely a supposed space saving move... ugggh.

That 3.5mm jack is just a legacy leftover, just like legacy ports on a PC. In addition, it requires DAC circuits to make it all happen. Like the legacy ports that came before, it did its job, but in the era of wireless and digital everything, it's just time. There will always be people complaining about it, then a couple years later those voices mysteriously fall silent.

I can count the number of times on hand hand I've used my wired headphones this year. Honestly, it's old tech. I highly doubt Apple is doing it simply as a space-saving measure. Making it thinner is more a side-effect than anything else.