Please ensure Javascript is enabled for purposes of website accessibility

Intel Corporation Should Fight for Apple's Business

By Ashraf Eassa – Feb 24, 2014 at 6:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With a solid modem in hand, Intel should fight aggressively to get inside the iPhone.

Back in 2010, Intel (INTC -1.11%) announced that it would be acquiring the assets of the struggling Infineon Wireless. Intel recognized that it would need to have in-house cellular baseband and RF transceiver capability if it were to become a viable player in the smartphone and tablet chip market.

Intel actually didn't pay all that much for it -- a mere $1.5 billion -- but it came cheap because it was in pretty bad shape. After three years, Intel may finally be in a position to win a big-ticket phone, such as the Apple (AAPL -1.96%) iPhone.

Intel can target a number of Apple's many SKUs
Looking at the specifications of Intel's XMM 7260, it seems that it is a competitive product with Category 6 LTE-Advanced support. The only deficiency that it seems to have regarding the upcoming Qualcomm (QCOM -1.36%) MDM9x35 is that it doesn't support the CDMA standard. While this may seem like a problem, it's important to understand that Apple has no less than five SKUs of its highest-end iPhone 5s, three of which don't offer or require CDMA support.

Source: AnandTech.

Apple is probably going to use Qualcomm for all of its high-end iPhones, CDMA or not. But it is very possible that Intel could end up powering the non-CDMA versions of the successor to the iPhone 5c, as Intel is probably going to be very aggressive with the pricing of its chips. This would not only be a win for Apple, but it could be a win for Intel, as winning a baseband socket might be more lucrative than winning a portion of Apple's A chips as part of a foundry deal.

Long-term, this is the Apple account worth fighting for
Over the long haul, Intel's best shot at penetrating Apple and Samsung will be via stand-alone cellular baseband processors, as the two heavyweights seem to be keen on developing their own applications processors. Competing with Qualcomm is tough business -- and Broadcom appears to be emerging as a viable contender for non-CDMA baseband sockets, although it seems to be behind Intel as far as timing goes. But Intel is finally in a position to start fighting for this business, something that Infineon Wireless as a stand-alone entity was not able to do.

Having some non-trivial percentage of Apple's baseband business and then a decent percentage of the non-Apple/non-Samsung smartphone applications processors isn't bad business by any measure. Smartphone revenue for Intel may not ever come close to what Intel gets on the PC side of things, but this is fantastic incremental business and could drive some nice long-term growth.

Foolish bottom line
So this is interesting from a number of angles. Intel, the company known for missing mobile, will finally be able to compete for a socket at Apple. Qualcomm, for the first time in a long time, sees competition at the leading edge of the baseband market, and Apple gets to pit the suppliers against each other in order to get a better cost structure. Interesting times are ahead for all involved.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intel Stock Quote
Intel
INTC
$29.34 (-1.11%) $0.33
Apple Stock Quote
Apple
AAPL
$148.11 (-1.96%) $-2.96
Qualcomm Stock Quote
Qualcomm
QCOM
$123.45 (-1.36%) $-1.70

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.