Over the last few years, Intel's (NASDAQ:INTC) cellular modem business (cellular modems are chips inside of smartphones that allow the devices to connect to cellular networks) has seen significant success in the marketplace, with the company's revenue from these chips going from practically nothing to being substantial enough for it to highlight in its quarterly earnings results.
That success is due almost entirely to smartphone giant Apple (NASDAQ:AAPL) choosing to tap Intel as an alternative supplier to Qualcomm (NASDAQ: QCOM) for the modems used in its iPhone 7-series, iPhone 8-series, and iPhone X smartphones.
Indeed, without Apple as a customer, it's unclear if Intel would have the business incentive to keep making the huge investments required to develop cellular modems.
Although Intel's modems are generally believed to be inferior to those provided by Apple's longtime modem supplier Qualcomm, Intel has continued to make steady improvements to the competitiveness of its stand-alone cellular modem portfolio.
To that point, on Nov. 16, Intel announced its next-generation LTE modem, known as the XMM 7660.
Let's see what Intel had to say about it in its announcement.
The Intel XMM 7480 LTE modem that powers some versions of this year's iPhones supports download speeds of up to 600 megabits per second and upload speeds of up to 150 megabits per second. The successor to this year's XMM 7480, known as the XMM 7560, supports download speeds of up to 1,000 megabits per second (1 gigabit) and upload speeds of up to 150 megabits per second.
It also, perhaps most crucially, adds support for the CDMA wireless standard, which should allow iPhones powered by Intel's modems to work on a broader range of wireless networks than today's Intel-based iPhones can.
The new modem that Intel just announced -- the XMM 7660 -- supports download speeds of up to 1.6 gigabits per second (Intel's announcement does not appear to include an upload speed rating).
Intel says that the XMM 7660 "will ship in commercial devices in 2019."
Headed to an iPhone near you
The reality is that Intel's only major cellular modem customer is Apple since Apple is the only major smartphone vendor that continues to use separate applications processors and cellular modems. Practically every other smartphone on the market, ranging from premium flagships to ultra-low-cost devices, uses chips that integrate the modem functionality with the applications processors.
This means that Apple is the only smartphone customer that Intel can realistically target with its cellular modems.
The good news for Intel is that it seems to be on track to delivering new modems at a reliable, annual cadence. The company successfully supplied the XMM 7360 and XMM 7480 modems to Apple over the last two iPhone generations, and it seems that Intel has products on track for the next two iPhone generations.
Moreover, while Intel's XMM 7360 and XMM 7480 clearly lagged their Qualcomm counterparts in terms of features, theoretical speeds, and even manufacturing technology (the latter impacts the power efficiency of the modems and therefore battery life of the devices they're in), the XMM 7560 and the XMM 7660 look much more competitive on all fronts.
Of course, there's more to a modem's real-world performance than the specifications at which it's rated on paper, and I wouldn't be surprised if Qualcomm's modems continued to deliver better real-world performance than Intel's modems for quite a while.
However, given that Qualcomm is, in many ways, a competitor to Apple, and given that cellular modem performance seems to be of minimal importance to most consumers beyond a certain point, Intel's increasingly "good enough" cellular modems could allow it to capture additional modem share at Apple in the years to come.
Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.