Yes, Apple Can Develop Its Own Baseband

Will Apple further bolster its silicon efforts by developing a cellular baseband?

Apr 15, 2014 at 10:30AM

There have been rumors going around that Apple (NASDAQ:AAPL), the consumer electronics giant that invented the smartphone as we know it today, is planning to develop an in-house cellular baseband for its mobile products. Now, this rumor is largely based on a handful of new hires at Apple as well as the company's increasing silicon prowess, but it's one that's not so easy to dismiss.

Apple can't do it? Nonsense
While Qualcomm has the lion's share of the cellular baseband market today, people seem to forget that there are a fairly large number of companies out there that have successfully developed these types of processors including (but not limited to):

  • Qualcomm
  • Intel
  • NVIDIA
  • Broadcom
  • Marvell
  • MediaTek
  • Spreadtrum
  • ST-Ericsson
  • Samsung
  • Altair Semiconductor
  • Texas Instruments

Now, while not every player on this list has been commercially successful at building a cellular baseband, and while the list of companies at the bleeding edge of cellular technologies is much smaller than this, cellular basebands clearly aren't black magic. With the right investment level and the right teams, it can be done successfully. Apple, which has shown its silicon might, could very well do it too with the right resources if much smaller, much less powerful companies have pulled it off.

By 2015? Probably not
The big question, then, is whether Apple actually will develop its own cellular baseband. While the Digitimes piece that helped give some credibility to this rumor claimed that Apple planned to launch products with an internal baseband by 2015, this timeline seems highly compressed. The typical semiconductor development cycle is about four years, and basebands are tricky because they need carrier certification.

So, if Apple recently began working on its own baseband, then it'll be several generations of iPhone from now. However, if it began building a baseband in the 2011/2012 time frame, then a late 2015 smartphone launch seems plausible, if a bit aggressive given that Apple's team would be new to this. Further, given that Apple hasn't made any high-profile acquisitions (for example, the Renesas Mobile asset that Broadcom bought in late 2013), it just doesn't seem like something that's imminent.

How about eventually?
While an Apple-built baseband is unlikely to be something that'll launch anytime soon, it may eventually be necessary for power and cost reasons for Apple to build one to integrate into its applications processor. This would probably help it pretty significantly in bringing down the cost structure of its iPhones, which will become more necessary as smartphone margins continue to come under pressure.

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Ashraf Eassa owns shares of Intel and NVIDIA. The Motley Fool recommends Apple and Intel. It recommends NVIDIA and owns shares of Qualcomm. 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.

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