1 Surprising Fact About the Samsung Galaxy Alpha

Samsung (NASDAQOTH: SSNLF  ) unveiled its next generation Galaxy Alpha smartphone on Aug. 13. Samsung looks to be positioning the handset as a mid-range, "premium" device. While much about the phone was known prior to the launch, the official specifications of one of the variants was unexpected.

A big win for Intel

While the North American variant of the Galaxy Alpha contains a Qualcomm (NASDAQ: QCOM  ) Snapdragon system-on-chip, the international version -- according to AnandTech -- includes a Samsung-designed applications processor, and an Intel (NASDAQ: INTC  ) XMM 7260 LTE-Advanced cellular modem. 

Those following Intel may be aware that the financial results of its mobile division have been a significant drag on what is otherwise a very strong core business. Just how bad is it? It lost more than $1 billion last quarter on sales of just $51 million. 

A substantial portion of that year-over-year decline in Intel's mobile revenue has been, according to the company, due to a large falloff in the sales of its 2G/3G cellular modem business. Though Intel had expected this decline to be offset by the ramp of LTE products, these products were a bit late to market, pushing out that ramp by several months. 

Intel's original LTE ramp plan. Source: Intel. 

However, with Samsung formally announcing that the XMM 7260 will provide cellular connectivity for its Galaxy Alpha, it seems that Intel's mobile business is set to see much improved results during the coming quarters. 

Why is this significant?

This announcement is significant in a number of ways. First off, it appears that Samsung is still either unable or unwilling to equip one of its more important handset designs with a Samsung-designed modem. This signals that Qualcomm and Intel -- two key vendors of stand-alone modems -- may be less at risk of being displaced by internally designed solutions than it had originally seemed. 

Additionally, it seems that Samsung is becoming more comfortable with using Intel's stand-alone modems, even in premium devices. Prior Intel modem wins at Samsung have been models of relatively lower importance, like the Galaxy K Zoom, and the international variant of the Galaxy S5 mini. 

Not all Galaxy Alpha models are created equal

It's also worth mentioning -- and this is the real shocker -- that the Intel modem used in the international variant of the Galaxy Alpha actually supports higher LTE-Advanced speeds than the modem block found inside of the Snapdragon 801, which powers the North American version of the phone. The MDM9x25 inside of the Snapdragon 801 supports up to category 4 LTE-Advanced, which means download and upload speeds are 150 megabits per second and 50 megabits per second, respectively. 

The XMM 7260 inside of the international version of the Galaxy Alpha, on the other hand, supports 300 megabits per second download and 50 megabits per second upload speeds -- similar to Qualcomm's higher end MDM9x35 stand-alone modem found inside of the Galaxy S5 Broadband LTE-A.

Is Intel finally catching up with Qualcomm?

While Qualcomm is still firmly in the lead when it comes to wireless chips, Intel has made significant progress. This time last year, Intel was barely shipping its first multimode LTE modem -- the XMM 7160 -- and even then, this solution was missing quite a few features relative to similar Qualcomm offerings.

The XMM 7260, on the other hand, comes much closer. Qualcomm's own category 6 LTE-Advanced modem, known as the MDM9x35, is still more sophisticated than the Intel part -- it's built on newer manufacturing technology, for example -- but the gap between the capabilities and time-to-market of Intel's best modem and Qualcomm's best modem has shrunken dramatically. 

It will be interesting to see how the competitive dynamic shifts as Intel moves its next generation modems internally on its leading-edge manufacturing technology. 

What does this mean for Samsung (and potentially Apple)? 

The development of competitive cellular modem technologies is difficult. Even Samsung, which has been developing modems internally for a number of years, still relies on external vendors for its premium products. Apple, too, another major handset vendor, currently relies on Qualcomm for stand-alone modems. 

Perhaps some day, both Samsung and Apple will have competitive enough in-house solutions so as to obviate the need for external vendors; but, given the R&D intensity of this market, it's more likely that both companies will rely on external vendors for years to come.

If Intel can show multiple generations of consistent, timely execution, then it could not only be a trusted supplier to Samsung, but it could even supply Apple, as well. This could potentially be good for Apple and Samsung, as having two strong component vendors probably means lower component prices than in the case of having a single dominant vendor. 

Foolish bottom line

It's interesting to see Intel gain increasing traction within Samsung's supply chain. In this case, Samsung wins, as it now has two credible high-end modem suppliers, and Intel wins because it looks like it's finally going to start seeing a reversal in the multi-quarter slump of its mobile business. Qualcomm, on the other hand, probably isn't too excited that it has some real competition in the upper end of the stand-alone cellular baseband space.

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