According to VentureBeat, Intel (NASDAQ:INTC) will enter the Apple (NASDAQ:AAPL) iPhone supply chain come 2016. The report asserts that the company's XMM 7360 LTE-Advanced modem "will ship inside a special version of the iPhone that will be marketed to emerging markets in Asia and Latin America."
How likely is this to be true? And what would it mean for Apple, Intel, and longtime Apple-supplier Qualcomm (NASDAQ:QCOM)(Apple's current cellular modem supplier)?
A "special version" of the iPhone, or just different?
The XMM 7360 is a fairly high-end cellular modem, supporting category 10 LTE-Advanced connectivity, which is significantly faster than the category 4 LTE modem found inside of the current iPhone 6 and iPhone 6 Plus models.
The report claims that the XMM 7360, which Intel says will first appear in devices during the second half of 2015, will go into a 2016 iPhone (so two generations from now), which makes sense given that Apple is known to use mature modem solutions. What's perhaps intriguing is that the modem is claimed to power a "special version" of the iPhone aimed at "emerging markets."
The XMM 7360, even in 2016, should be a relatively high-end modem with the feature-set commensurate with a flagship iPhone in 2016. This makes it tough to believe that Apple would be using this modem for, say, a low-cost iPhone for these markets.
What seems more likely is that Apple will simply have different modems inside of iPhones depending on the region in which said iPhones are sold. I expect no difference in the appearance or functionality of phones with Intel modems versus the ones with Qualcomm (NASDAQ:QCOM) modems. This practice is hardly unprecedented; Samsung (NASDAQOTH:SSNLF) routinely does this with its Galaxy S/Note phones.
Good for Apple and Intel, bad for Qualcomm
If Intel's modem solutions and future roadmap are viable for use in Apple devices, this is very good for both Apple and Intel. Apple would win as it gets a second source for cellular modems, which could potentially diminish Qualcomm's pricing power and lead to improved margins for Apple.
Intel would win because it would have a relatively high-volume customer for its stand-alone LTE solutions, driving increased mobile-related revenue and scoring a much-needed credibility win.
Qualcomm would obviously be the loser here as it currently has 100% share of the cellular modem shipments into Apple's iPhones. If Intel does come on as a second source, that share necessarily goes down. The financial impact will, of course, depend on what kind of share Intel takes, and what kind of growth Apple sees in its iPhone shipments from now into 2016.
This would neither be the "end of the world" for Qualcomm (losing the Galaxy S6 applications processor spot was arguably worse since the chip content there was probably higher), nor would this be the panacea for Intel's mobile-related woes, but it would be a significant development.
A note of caution
VentureBeat stressed that this deal "could still fly off the rails if Intel misses key deadlines, or if some other blow-up between the companies occurs" -- so, it doesn't seem as though this is quite a "done deal."
Further, it's worth noting that VentureBeat's sources haven't always been 100% reliable. For example, about a month ahead of the iPhone 6/6 Plus launch, the site published an article talking about the iPhone 6's specifications and launch schedule. According to that article, the iPhone 6 would sport the following specifications:
- CPU cores in the A8 processor running at 2.0GHz
- No sapphire screen
- 802.11ac Wi-Fi
- Qualcomm MDM9x35 LTE-Advanced modem
- 5.5-inch iPhone shipping "several weeks or even a month later" than the 4.7-inch iPhone
VentureBeat's sources got it right in that the iPhone 6/6 Plus didn't have sapphire screens, and it got the move to 802.11ac Wi-Fi correct. However, they got the A8 processor's frequencies wrong (1.4GHz actual versus 2.0GHz expected), they got the modem wrong (it was the MDM9x25 not the newer MDM9x35), and the launch timing of the 5.5-inch version relative to the 4.7-inch one incorrect as well.