Last quarter, chip giant Intel (NASDAQ:INTC) reported that sales of its cellular modems rose 131%, clearly fueled by its position as the sole supplier of the cellular modems into Apple's (NASDAQ:AAPL) latest trio of iPhones. (Intel was one of two suppliers in the last two iPhone generations.)
Although sweeping the entirety of this year's iPhones means that Intel's share of Apple's cellular modem orders is slated to rise dramatically over the course of the current iPhone product cycle, Intel's modem share in the iPhone still isn't 100% -- Apple's older iPhone 7 and iPhone 8 families don't use Intel modems exclusively.
If Intel keeps winning all the modem orders in future iPhones, then as older generations of iPhones fall off and are replaced by newer models, the company could find itself with 100% modem share at Apple in a couple of product generations.
Below, I'll estimate just how much cellular modem share there could be for Intel to gain.
Estimating non-Intel volume
Apple doesn't break out the sales of individual iPhone models; it has historically disclosed unit shipments and revenue and, beginning with its next earnings release, will only break out revenue.
Fortunately, analyst Gene Munster with Loup Ventures published his predictions for what percentage of shipments in total fiscal year 2019 (that's the current fiscal year) each model in the current lineup will make up.
According to Munster, the iPhone 8 and iPhone 8 Plus combined are set to be 13% of Apple's fiscal year 2019 iPhone unit shipments, and shipments of the iPhone 7 and iPhone 7 Plus stand to make up 28% of unit shipments during the year. If Munster's projections are accurate, then this means that a whopping 41% of the iPhones that Apple will sell in the current fiscal year won't come exclusively with Intel modems.
Now, here's where things get even trickier and more error could be introduced. While we know that both Intel and Qualcomm (NASDAQ:QCOM) supply modems into the iPhone 7-series and iPhone 8-series devices, we don't know exactly how the two companies split the orders. To make things simple, let's just assume that they split the modem orders for these phones evenly. Under that assumption -- and, admittedly, it's a crude one -- Qualcomm would still have about 20.5% of Apple's modem orders over the course of the current product cycle.
Whatever the actual figure is, though, it's certainly nonzero and likely significant, and still represents additional room for Intel to grow its modem share at Apple over the next two years -- assuming that the iPhone 7-series is discontinued in the coming product cycle and then the iPhone 8-series goes away in the subsequent one, with both devices replaced by exclusively Intel-powered products.
I'll be keeping a close eye on how Intel's cellular modem business progresses, and will continue to report back as new data points come in.