1 More Surprise Winner Inside the Apple Inc. iPhone 7

By Markets Fool.com

Continue Reading Below

Image source: Getty.

The Apple (NASDAQ: AAPL) iPhone 7 and iPhone 7 Plus officially hit store shelves on Sept. 16, and it wasn't long before Chipworks published a tear-down report showing the chips inside these new smartphones.

There is a lot of neat stuff going on inside Apple's latest smartphones, but the Chipworks tear-down report revealed a new design win that could be interesting for a small and relatively unknown chipmaker.

An FPGA inside the iPhone

According to Chipworksthe iPhone 7 contains a field programmable gate array, or FPGA, from a small FPGA specialist called Lattice Semiconductor (NASDAQ: LSCC).

Continue Reading Below

A good explanation of what an FPGA is comes from another FPGA manufacturer, Xilinx:

FPGAs can be reprogrammed to desired application or functionality requirements after manufacturing. This feature distinguishes FPGAs from Application Specific Integrated Circuits (ASICs), which are custom manufactured for specific design tasks.

Chipworks says that it found an FPGA from Lattice carrying the model number "ICE5LP4K."

Based on the model number of this chip, it would seem that we are looking at the highest-end member of Lattice Semi's iCE40 Ultra family of FPGAs. According to the data sheet for the iCE40 Ultra family of FPGAs, it is "an ultra-low-power FPGA and sensor manager designed for ultra-low-power mobile applications such as smartphones, tablets, and hand-held devices."

Given the programmable nature of FPGAs, it's hard to know what exactly what Apple is using this chip for.

Image Source: Lattice Semiconductor.

What could this mean for Lattice?

In an investor presentation accompanying its earnings call last month, the company said that its revenue in the second quarter "benefited from ramping Tier 1 customer OEM win." Additionally, it expects "double-digit revenue growth" during the current quarter driven partially by "ramping Tier 1 Consumer OEM wins."

It's clear that at least some of Lattice's confidence came from the fact that it would be entering the iPhone 7 supply chain.

The good news for Lattice is that tear-downs of the previous-generation iPhone 6s and 6s Plus didn't show the presence of a Lattice FPGA. This should mean that the iPhone 7 and 7 Plus represent nothing but upside for the programmable-logic specialist.

It's hardly a given, though, that Lattice will be able to maintain its spot inside future iPhones. Perhaps Apple is merely using an FPGA as a stopgap solution until it can build a specialized chip to perform the task that it currently uses the FPGA for.

For example, the the Chipworks tear-down of theSamsung (NASDAQOTH: SSNLF) Galaxy S5 revealed a Lattice FPGA, but its tear-down of the later Galaxy S7 Edge doesn't show a Lattice chip inside

The good news is that in the here and now, Lattice is poised to benefit from the sales cycle for the iPhone 7 and 7 Plus.

Additionally, even if Lattice's chips aren't used in the iPhone 8 (or whatever Apple calls its next iPhone), the company should still generate revenue from sales of the iPhone 7 and 7 Plus when they become Apple's mid-range product offerings -- though the year-over-year comparison would become unfavorable for Lattice.

On the flip side, if Lattice's chips are chosen for the iPhone 8, then the company should see revenue growth -- at least in the Apple-related portion of its business -- from the fact that its chips will be in both Apple's latest smartphone and its mid-range offering.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.