As detailed here, Qualcomm (NASDAQ: QCOM ) tends to benefit more from the sale of each high-end Samsung smartphone containing its chips than it does from the sale of an Apple (NASDAQ: AAPL ) iPhone. Not only do Samsung's phones tend to have higher average selling prices for royalty calculation purposes, but they also tend to have more Qualcomm silicon content. With the iPhone 6, is Qualcomm set to gain more content share?
More RF chips required
In moving to the next-generation iPhone, Apple is almost certainly going to move to a next-generation cellular baseband/RF transceiver from Qualcomm. This alone could lead to higher average selling prices for the chips that Qualcomm sells to Apple.
In addition, Qualcomm could win more RF content with its RF360 platform, particularly as LTE-Advanced support requires additional chips (such as an envelope tracker). This isn't a huge amount of content per phone, but across what is likely to be over a hundred million phones, it's material.
What baseband will Qualcomm supply to Apple?
The open question, then, is what cellular modem Apple will buy from Qualcomm. Some believe that Apple will go with Qualcomm's latest and greatest MDM9x35 category 6 LTE-Advanced modem, which made its first appearance in Samsung's updated Galaxy S5, but others think Apple will move to Qualcomm's MDM9x25, which is a category 4 LTE-Advanced modem. Both would be meaningful upgrades from the current MDM9615 which only supports category 3 LTE.
The big concern surrounding the MDM9x35 is that it's built on Taiwan Semiconductor's brand-new 20-nanometer process. While TSMC is confident that it can ramp this node very steeply during the third and fourth quarters of the year, the yields probably won't be as good as the now very mature 28-nanometer MDM9x25, so costs could be materially higher -- and Apple needs to make sure its margins remain high.
Could the answer be both?
Given that Apple appears to be launching two variants of the iPhone 6 – 4.7-inch and 5.5-inch models -- Apple could choose to go with the cheaper, more readily available MDM9x25 for the more mainstream 4.7-inch model and reserve the more expensive MDM9x35, which would tout faster theoretical speeds and features, for the even more premium 5.5-inch model.
In that case, Apple would be able to preserve or even grow its margins, particularly as it would be able to charge a sizable premium for the larger 5.5-inch model.
Foolish bottom line
It won't be too long now before we get the iFixit and Chipworks tear-downs and learn exactly what's inside the iPhone 6. At any rate, it seems that chip vendor Qualcomm is poised to gain chip content within the next-generation iPhone. While this increased content is likely to be -- in aggregate -- about $5 to $10 per phone, across what is likely to be north of 100 million phones sold over the next year, it adds up quite nicely for the wireless chip giant.
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