Sales of Apple's (AAPL +0.62%) iPhone are booming. Revenue from the iPhone soared 23% year over year in the first quarter of fiscal 2026, marking the best-ever performance for Apple's flagship product.
However, sales could have been even better. Apple uses TSMC to manufacture its custom iPhone chips, and there currently isn't enough supply to meet demand. The AI boom and the subsequent demand for AI accelerators have created an industrywide shortage.
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"We are currently constrained, and at this point, it is difficult to predict when supply and demand will balance. The constraints that we have are driven by the availability of the advanced nodes that our SoCs are produced on," said Apple CEO Tim Cook during the earnings call.
Cook wouldn't comment on how the supply situation would evolve, or how the company planned to address it. However, Apple's admission that it's likely leaving money on the table is incredibly good news for Intel (INTC 4.64%).
The Intel rumors are looking more likely
Late last year, an analyst noted that visibility into a potential deal for Apple to use Intel Foundry for some of its manufacturing needs had improved. The rumor was that Apple was considering a variant of the Intel 18A process, the same process being used for Intel's Panther Lake chips, for lower-end M-series chips.
Other analysts used this apparent foundry progress as one justification for upgrading Intel stock, and the rumor was further fleshed out to include Apple considering the upcoming Intel 14A process for some iPhone chips in 2028. While it's unlikely that a deal between Intel and Apple has been reached, it does seem likely that the two companies are moving in that direction.
Cook's comments that Apple is facing manufacturing constraints amid strong demand for its iPhones lend some legitimacy to these rumors. Another factor: Apple is reportedly no longer TSMC's largest customer, and it may be losing the special privileges it's long enjoyed at the foundry. That's all the more reason for the company to seek additional suppliers.
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Intel needs a foundry win
Intel is still working on securing customers for its Intel 18A process, and it's engaging with a couple of customers for Intel 14A. The company expects to lock down commitments in the second half of the year.
Intel's foundry business won't be sustainable in the long run without meaningful external customers, so this year is critical for the semiconductor giant. The good news is that, while Intel needs Apple, Apple also needs Intel. TSMC won't be able to increase capacity quickly enough to meet demand any time soon.
With iPhone sales soaring, it makes more sense than ever for Apple to tap Intel for manufacturing. That's great news for Intel as it marches toward a comeback.
