Those who follow the teardowns of Apple's (NASDAQ:AAPL) iPhones know the devices typically feature Qualcomm (NASDAQ:QCOM) cellular modems. It is also common knowledge that Apple has not used "leading-edge" modems in its latest iPhone models -- a point Scotiabank analyst Daniel Chain reaffirmed in a recent research note on Qualcomm.
Indeed, Chan pointed out that the "iPhone 5s used a modem that was 2 years old." The MDM9x15 inside the iPhone 5s actually debuted in the iPhone 5. It's worth exploring whether Apple will repeat this reuse move with the iPhone 6s -- this time with the MDM9x25 modem.
An easy double?
There has been significant concern in the investment community around the idea that since the iPhone 6 and 6 Plus are selling so well, and since they're just such good products, Apple will have a tough time increasing sales in 2016.
A tried-and-true way to keep demand high is to introduce increasingly compelling new features each year. While Apple has tended to shy away from participating in "spec wars," the company isn't shy about talking up the improvements it brings to its latest products.
If Apple were to move to Qualcomm's latest MDM9x35 cellular modem (or as Chan suggested, the similar-performing Intel (NASDAQ:INTC) XMM 7260), then at the unveiling of the next-generation iPhone the company could brag about doubling LTE speeds from the prior iPhone. Indeed, Apple could truthfully claim this is the largest increase in cellular data speeds it has ever brought to iPhone.
Could the "s" in iPhone 6s stand for "speed"?
Sticking with the MDM9x25 modem for the iPhone 6s, though, would likely reduce its costs for that modem. Now, if Apple is packing the iPhone 6s with plenty of other, perhaps more visible, new features, then taking advantage of the cost structure headroom afforded to the company via the modem price drop might make sense.
However, if Apple isn't bringing much to the new iPhone in the way of new user experience features (things along the lines of Touch ID, Apple Pay, and so on), then a possible strategy could be to focus on improving device performance across all key vectors. In other words, the "s" in iPhone 6s could stand for "speed," as it did with the iPhone 3GS.
Apple is likely to bring an enhanced system-on-chip to the iPhone 6s, so graphics and application performance will probably get a significant boost. If the tech giant brings in Qualcomm's MDM9x35 category 6 LTE-Advanced modem, and if it upgrades to a 2x2 MIMO 802.11ac Wi-Fi chip from Broadcom (UNKNOWN:BRCM.DL) (up from the 1x1 802.11ac chip), then Apple pretty easily has a phone that is "up to twice as fast" as the iPhone 6 in two key respects.
Does Apple need to do all of this?
If Apple were to double LTE speeds, double Wi-Fi speeds, significantly improve applications processor performance, double the included memory (as rumored), enhance Touch ID, and include a much better camera (also as rumored) this could very well be the largest generation-on-generation iPhone improvement.
However, I wonder if Apple actually needs to include all these potential enhancements in order to achieve new records in iPhone sales, particularly as the improvements in aggregate could drive the cost structure way up. It might be smarter for Apple to focus on improving key user experience elements such as the camera, applications processor, and software than on packing in faster components that look great on paper but might not be noticed by most users.
That being said, given how important cellular data performance is, I think moving to a faster (and most likely more power efficient) modem would be worth the extra cost. I think it'll all come down to what kind of pricing Apple can get from Qualcomm.