Back in 2016, wireless giant Qualcomm (NASDAQ:QCOM) lost its status as the sole source of the cellular modems inside Apple's (NASDAQ:AAPL) iPhones, when chip giant Intel (NASDAQ:INTC) became a second modem source for the iPhone 7-series of devices.
Qualcomm remained an iPhone modem supplier for the subsequent generation of iPhones. However, Qualcomm was designed out of this year's crop of iPhones, made possible by Intel's added support for the CDMA wireless standard -- a standard that some carriers still rely on -- to its latest cellular modem, known as the XMM 7560.
Back in February, analyst Ming-Chi Kuo, at the time reporting that Intel would be the sole supplier of modems into the 2018 iPhones, indicated -- by way of 9to5Mac -- that Qualcomm might eventually be readded to the iPhone modem supply chain.
Here's 9to5Mac's summary of Kuo's comments:
He is now claiming that Qualcomm will be excluded from 2018 iPhones altogether. However, KGI does not rule out Qualcomm returning to the supply chain, perhaps as concessions in the patent lawsuit settlement.
KGI says there's also a risk that Intel may not be ready for 5G networking as quickly as Qualcomm, which may also force Apple's hand.
Given recent developments, I think the odds that Qualcomm will win back iPhone modem orders anytime soon don't look good. Here's why.
Intel's execution seems to be improving
Qualcomm is the market leader in terms of cellular modems, but Intel's execution seems to be improving. According to PC Magazine's testing, "the iPhone XS -- powered by Intel's XMM 7560 modem -- is a huge step up from the iPhone X when it comes to LTE download speeds, according to exclusive new data from Cellular Insights and Ookla Speedtest."
The site did admit that it "doesn't quite match the Qualcomm X20 modem used in the Samsung (NASDAQOTH: SSNLF) Galaxy Note 9." However, the performance difference seems a lot smaller than it was with prior generations of Intel modems, signaling that Intel has improved the competitiveness of its modem technology with the XMM 7560.
As far as the 5G risk that Kuo highlighted back in February, it's worth noting that Intel recently announced that its XMM 8160 5G modem, the modem that Fast Company reports will power Apple's 2020 iPhones, is on track to ship in the second half of 2019 and will pop up in devices during the first half of 2020.
Fast Company also reported that Intel's XMM 8060 5G chip -- a chip that Intel indicates is intended for use as a "development platform," not as a part that'll find its way into shipping devices -- is leading to "heat dissipation issues."
With that in mind, Fast Company stated that "Apple's current issues with Intel are not serious enough to cause Apple to reopen conversations with Qualcomm about supplying 5G modems."
Now, supplying a company like Apple is a marathon, not a sprint, so Intel can't just get the XMM 8160 out and declare victory for all time. The company needs to keep cranking out modems that meet Apple's requirements while not missing a beat in terms of schedule.
However, given that Intel's modem execution seems to be on an upward trajectory, and considering the bitter legal dispute that's currently ongoing between Apple and Qualcomm, the chances don't look good that Qualcomm will win back Apple's cellular modem business anytime soon.