Believe it or not, Intel (NASDAQ:INTC) once supplied chips for Apple's (NASDAQ:AAPL) iPhone. Now, this wasn't the highly coveted applications processor socket, but until the iPhone 4s (which came out after the Intel/Infineon deal had closed – bummer for Intel!) a division that is now a part of Intel was an Apple supplier. Of course, that socket has been long-lost to Qualcomm (NASDAQ:QCOM), which has left the rest of the cellular chip industry in the dust, but could Intel find its way back into the iPhone with its revamped baseband efforts?
Without CDMA support, it will be difficult
When Infineon was competitive, Apple built separate versions of its iPhone – one for GSM networks and the other for CDMA networks. While GSM is more popular worldwide, CDMA is still the 3G standard for Verizon, Sprint, US Cellular, and countless other networks, particularly in the US. Intel's modem roadmap does not seem to include CDMA support, which means that unless 3G networks that support the CDMA standard simply go away (very unlikely anytime soon), Qualcomm will have at least one SKU of the iPhone on lockdown.
While it's possible that if Apple wanted to dual-source its modems, it could yet again produce two separate iPhones. The question, though, is if Qualcomm is producing quality modems then why would Apple want to complicate its supply chain, as well as incur the extra engineering costs of building two phones? Sure, the costs here would likely be lost in the noise of Apple's gigantic profit machine, but Tim Cook isn't going to spend a penny more than he needs to.
Qualcomm is likely safe during this generation
Intel has secured the honor of No. 2 player in cellular baseband (although many other companies claim that they're on track to claim this spot, Intel is shipping today). With that in mind, Apple's iPhone is a premium product and as such it is likely to feature premium components. Now, it is very likely that Intel's upcoming XMM 7260 LTE-Advanced modem could be a serious contender in the iPhone 6 (again, if Apple is willing to do multiple SKUs) if Intel is willing to go super aggressive on price, but Qualcomm is unlikely to want to lose this socket – it'd be a PR/share price nightmare.
On top of that, Qualcomm will be sampling its own category 6 LTE-Advanced modem (built on TSMC's 20 nanometer process) in early 2014. It is likely that this modem will have performance and power advantages over the Intel model (which is built on an older manufacturing technology). Indeed, performance and power are critical, particularly if Apple pushes an even thinner, sleeker design for the iPhone 6.
The next iterations could get interesting
As Intel transitions its cellular modems from TSMC to its internal manufacturing technologies, it will be able to finally leverage its process technology lead to drive meaningful performance and power gains. Furthermore, by the time this transition is complete (likely in late 2015/early 2016), Intel may be able to pose a meaningful competitive threat to Qualcomm for the Apple socket. Until then, though, it is difficult to see a meaningful advantage for Intel against the incumbent.
Foolish bottom line
While some Intel investors are hoping for an Apple foundry deal, this would likely be low-margin and would occupy a fab that could be used to produce higher margin X86 chips. The real "win" that Apple could score at Apple would be in securing a cellular baseband win. This will be incredibly tough to achieve and likely won't happen over the next generation or two, but it becomes a distinct possibility down the line.