DIGITIMES recently published an interesting report in which it claims, citing industry sources, that MediaTek-- which has long played second fiddle to Qualcomm (NASDAQ:QCOM) in the mobile applications processor market -- could supply cellular modems to Apple (NASDAQ:AAPL) for the iPhones that'll launch in 2018. 

To be clear: The report doesn't indicate that such an agreement is in place, nor does it even appear to cite sources within either Apple or MediaTek that may be privy to any potential supply arrangement. Instead, the industry sources that DigiTimes cites appear to be offering speculation that MediaTek could win such orders due to its "technology, capacity and pricing advantages." 

Here's why this seems highly unlikely. 

Apple's iPhone X.

Image source: Apple.

MediaTek doesn't have the technology

In terms of cellular modem technology, MediaTek is substantially behind Qualcomm, the market leader in cellular modems and one of the two major suppliers of cellular modem chips for Apple's iPhones today.

In fact, one of the things that has allowed Qualcomm's mobile chip business to compete so effectively against MediaTek, even in the Chinese smartphone market, has been the former's superior cellular modem technology. 

For some perspective, MediaTek's most advanced mobile processor -- the Helio X30 -- incorporates a cellular modem that supports just 450-megabit-per-second download speeds and 150-megabit-per-second upload speeds. 

Even the Intel modem that powers some of this year's iPhone 8/8 Plus/X smartphones -- a modem that's widely viewed as inferior to its Qualcomm-made counterpart -- is rated at 600-megabit-per-second download speeds and 150-megabit-per-second upload speeds. 

Next year, Apple will have access to the Snapdragon X20 LTE modem, which should support peak download speeds of 1.2 gigabits per second and peak upload speeds of 150 megabits per second. Intel's competing offering, the XMM 7560, supports 1-gigabit-per-second download speeds and 150-megabit-per-second upload speeds. 

Perhaps MediaTek is planning to announce a stand-alone cellular modem with specifications (and, more importantly, real-world performance and broad network compatibility) in the same league as the Snapdragon X20 or the XMM 7560, but I don't think this is likely. 

Why MediaTek won't compete

Ultimately, MediaTek's mobile chip business generates most of its revenue from the sale of integrated applications processor and modem solutions into the low end, midrange, and high end of the smartphone market.

MediaTek has tried to go after what Qualcomm terms the "premium tier" of the smartphone market with its Helio X-series of integrated modems and applications processors, but its latest entry into that family -- the Helio X30 -- simply fell short

It wasn't too long after the Helio X30 performed poorly in the marketplace that reports began to emerge that MediaTek was going to refocus its efforts on the midrange of the smartphone market

It simply wouldn't make sense for MediaTek to go through the trouble to try to build high-end stand-alone cellular modems aimed at winning some share at a single potential customer (Apple). 

Indeed, I don't think MediaTek will take the risk of developing such a solution -- a solution that Apple may very well reject -- when Apple already has two large players that have products that meet Apple's needs. 

MediaTek's best shot at winning a spot inside of Apple products would be to, as DIGITIMES writes, "seek cooperation with Apple in future product lines such as smart speakers, wireless charging devices and wireless connection systems."

MediaTek would, of course, face fierce competition from the likes of Broadcom for things like wireless charging chips (Broadcom is believed to have won the wireless charging chip spots inside of Apple's 2017 iPhone lineup), but I think its chances there are certainly better than they are for the main cellular modem spot in Apple's iPhones.

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 Broadcom Ltd and Intel. The Motley Fool has a disclosure policy.