The company's public commentary suggests that this isn't just a proverbial flash in the pan, either -- Intel seems to have the iPhone 8 (or whatever Apple calls the follow-on devices to this year's iPhone 7 series) as well as the follow-on to that in the bag.
In this article, I'd like to go over why I think there's an opportunity for Intel to gain dollar content share at Apple with the 2018 iPhone.
The shift to 5G
Both Intel and wireless chip giant Qualcomm both intend to sample 5G modems in 2017 with commercial shipments beginning in 2018.
To my knowledge, both companies' 5G modem solutions will require separate 4G LTE modems (either as discrete parts or integrated in the smartphone applications processor) for phones implementing the 5G solution to work on today's 4G networks.
Apple was late to adopt LTE relative to some of its peers in the smartphone market, but given that Apple has "grown up" quite a bit from a technical perspective (substantially higher research and development budget) and the industry has gotten much more competitive (forcing Apple to try to adopt cutting-edge technology for its devices), it may be one of the first to deploy 5G modems.
Should Apple choose to adopt 5G functionality in its 2018 iPhone models, this could be a solid win for Intel's cellular modem business.
Indeed, if Intel goes from selling a single LTE baseband (and associated components) to selling both an LTE baseband as well as a 5G modem (and any additional components), then it makes sense that the chipmaker's dollar content per iPhone could increase.
Given that Intel's only significant exposure to the large smartphone chip market is via the sale of cellular modems to Apple, a big boost in dollar content at Apple should mean a big boost in the revenue -- and ultimately profits -- that Intel can harvest from the smartphone market.
A big step for Intel's modem business, a small step for Intel in total
Intel is an extremely large company, generating nearly $60 billion in revenue during 2016. Intel's revenue run rate from sales of modems to Apple is likely in the ballpark of $1 billion per year (assume $10 per modem, 100 million iPhone units with Intel modems sold per year).
If Intel were to see its dollar content rise by 50%, then roughly $1 billion in annual sales becomes $1.5 billion; a doubling of dollar content would mean that $1 billion in annual sales goes up to $2 billion.
Of course, Intel is already investing significantly to develop these cellular modems, so the more revenue that the company can wring out of those investments, the better. However, any potential revenue growth from additional dollar content in a future iPhone isn't going to be a game changer for Intel stock.
To put things into perspective, though, few things have the potential to move the needle for Intel stock -- what the company needs to do (and has been doing) is looking to capitalize on as many reasonably sized opportunities as possible in the hopes that, in aggregate, they add up to enough additional revenue to deliver revenue growth even as its largest business (personal computer processors) declines.