Rumor Alert: Will This Company Supply Chips for the Apple iPhone 6s?

Last year, I penned a piece speculating that since Intel (NASDAQ: INTC  ) has a pretty good discrete modem road map, it may have a shot of winning back cellular baseband business at Apple (NASDAQ: AAPL  ) . Along those lines, Cowen semiconductor analyst Timothy Arcuri believes that Intel and Apple are in talks about a potential cellular baseband supply deal for the iPhone 6s (2015 iPhone).

Apple probably wants a viable second source
The iPhone is the single biggest profit driver for Apple. This means that quality and performance are paramount, but that maintaining a favorable cost structure to keep profitability high is also important.

Until very recently, Apple has not had a viable alternative to Qualcomm for its smartphones. The companies' relationship seems to be strong, but there's no doubt that having a second source would allow Apple to -- at the very least -- get some meaningful price concessions from Qualcomm (thus improving Apple's margins). 

What does Intel's modem roadmap look like?
At this year's Intel Developer Forum in Shenzhen, China, Intel showed a very vague stand-alone modem road map (pictured below).

Source: Intel.

Apparently, Intel plans a next-generation LTE-Advanced modem at some point in 2015. The modem should support Category 7 LTE-Advanced, both TDD/FDD LTE modes, TD-SCDMA, as well as 3GPP Release 11, putting it on feature parity with the improved MDM9x35 block found inside of the Qualcomm Snapdragon 808/810 scheduled to hit devices next year.

The unanswered question
One of the most important uses for a smartphone is surfing the Web while on the go. In these situations, the cellular modem is doing quite a bit of work. This means that for longer active battery life, the modem needs to be as power-efficient as possible -- something enabled by more advanced semiconductor technologies. 

If the follow-on to Intel's latest XMM 7260 modem (which is built on 28-nanometer for the baseband and 65-nanometer for the RF) is built on the Intel 14-nanometer process, then it should have extremely favorable performance and power characteristics. If Qualcomm does not transition to 16 FinFET for its stand-alone modem during the second or third quarters, then Intel could be at a material power consumption advantage.

That said, if this is another 28-nanometer part (and some fairly dated leaked road maps suggest this is the case), then not only will Intel be behind the 20-nanometer part available today, but Qualcomm may even transition to 16 FinFET for its follow-on to the MDM9x35. Wouldn't that be ironic?

What's the verdict on this rumor? 
If Apple is going to select Intel as a cellular chip provider, then Intel is going to need an edge. Building a world-class 14-nanometer stand-alone baseband that is ready to go for a 2015 iPhone would be a huge win for the chipmaker.

However, given that at least one leaked road map out there claims that Intel's next-generation modem is yet another 28-nanometer part with rough feature parity to Qualcomm's recently released MDM9x35, it would be prudent to keep expectations low. 

Want an Apple supplier with nearly unlimited room to run? 
Both Intel and Qualcomm are strong, highly successful businesses. However, the cat's out of the bag on these two meaning that the opportunity for huge gains is well past. However, if you're looking for a great way to play the next big megatrend that Apple's next smart device could drive, and if you want in before everybody knows about it, then click here!


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