Intel's (NASDAQ:INTC) cellular modem business is really starting to make some inroads at Apple (NASDAQ:AAPL).

After winning a deal to supply cellular modems to Apple in support of the iPhone 7-series smartphones, and with the company almost certainly inside of Apple's iPhone lineup set to be released this fall, Intel will apparently supply modems into the next-generation Apple Watch, according to a fresh report from Bloomberg.

Three Apple Watch models.

Image source: Apple.

What's even more interesting, too, is that Bloomberg doesn't mention Qualcomm (NASDAQ:AAPL) -- a longtime supplier of cellular modems for Apple's iPhone and iPad devices as well as Apple's current legal rival -- as a supplier of modems into the new Apple Watch.

Intel may have the cellular-capable Apple Watch design win all to itself.

Coming later this year

Bloomberg says that the new Apple Watch models with LTE capability are "planned for release by the end of the year."

Apple's prior-generation Apple Watch models, the Apple Watch Series 2, launched in September 2016, so if the company hits its current launch target for the new models, it would indicate that Apple is targeting roughly annual refreshes for its Apple Watch product line.

Such refreshes are important to both attract new customers as well as convince owners of older-generation models to upgrade to newer models.

If the devices are coming later this year, then build activity should begin several months beforehand, meaning that Intel will recognize revenue from sales of chips into the Apple Watch well before Apple does.

What does this mean for Intel?

Per research firm Strategy Analytics, Apple shipped 11.6 million Apple Watch models in 2016. Apple CEO Tim Cook recently said that Watch sales "were up over 50% in the June quarter." (Apple does not report unit sales for Watch.)

So, if we suppose that Apple enjoys about 50%-unit shipment growth in Apple Watch during 2016, and then assume another 25% growth in 2017, then Apple would -- under this hypothetical (though reasonable) scenario -- ship about 20 million Apple Watch models in 2018.

Bloomberg says that Apple "is planning to release a version of its smartwatch later this year that can connect directly to cellular networks," so I doubt that every Apple Watch, beginning with this year's new release, will come with embedded LTE modems.

Instead, it's much more likely that Apple will do with the Apple Watch what it does with the iPad -- offer both Wi-Fi only and cellular models.  

It's hard to guess what the split between the Wi-Fi-only and cellular Apple Watch models will be, but let's assume that the cellular models make up just 10% of Apple's overall Apple Watch shipments in 2018.

If we assume that Intel gets, say, $5 per cellular modem sold into the Apple Watch, then $5, multiplied by around 2 million units (10% of total), yields total revenue of about $10 million.

For a smaller supplier, $10 million of extra revenue in a year might be a big deal, but for Intel -- which is on track to generate north of $61 billion in sales this year -- it's just not going to move the needle.

Nevertheless, Intel gains the benefit of working with Apple and understanding its requirements for smartwatch-bound LTE modems, which it could potentially roll into chips that it could sell to other smartwatch vendors in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.