I had been very encouraged by Intel's (NASDAQ:INTC) wins of the modem spots inside of a number of Samsung (NASDAQOTH:SSNLF) smartphones, with some variants of the Galaxy Alpha and Galaxy Note 4 coming to mind. However, even though Intel seemed to be gaining traction with Samsung on the modem front, Samsung's aggressiveness with its own modem efforts means Intel is probably out of Samsung's phones -- at least the flagship designs -- for good.
Galaxy S6 is mostly Samsung... with some Qualcomm reportedly on the side
To my knowledge, the majority of the Samsung Galaxy S6 models feature Samsung's own category 6 LTE-Advanced modem, with models sold in regions requiring CDMA/EV-DO reportedly using a Qualcomm (NASDAQ:QCOM) baseband.
I don't believe Intel's XMM 7260 is anywhere in the Galaxy S6 mix.
Now, Intel does have a very competitive-looking category 10 modem with the XMM 7360, which is said to be sampling now and shipping commercially in the second half of 2015. However, Qualcomm will have a very competitive device with its own category 10 MDM9x45 solution, and Samsung might have a more capable modem to include in the Note 5 later this year.
Without Samsung, what's left for Intel's stand-alone baseband chips?
If Intel can't win the stand-alone baseband spot in future Samsung flagship phones, then it seems as though there's not much of an addressable market in phones for its stand-alone baseband chips. In low-end and mid-range phones, integrated applications processors and basebands are necessary, and the same holds true for the non-Apple (NASDAQ:AAPL) and non-Samsung high-end smartphone market.
My view is that Intel's stand-alone modems will go mostly into higher-end, Intel-powered tablets, Ultrabooks, and 2-in-1 convertible devices. I doubt this will mean much for Intel's mobile revenues, but Intel has to develop these baseband technologies for integration into future system-on-chip products anyway, so those development efforts aren't wasted.
But, wait... Apple uses stand-alone modems?
It is true that Apple used stand-alone modems, and it's also true that there have been rumors in the press that Intel may be added on as a baseband vendor for future iPhones. If this turns out to be true, it would obviously be good for Intel's mobile group.
I wouldn't expect Intel to be able to wrestle away the majority of iPhone baseband orders from Qualcomm. That said, I'd imagine if Intel were to get into even, say, 15%-20% of iPhones going forward, the revenue from this would far eclipse what Intel is getting from all of its other high-end baseband customers combined.
Intel needs an integrated high-end part, too
It's pretty clear at this point that if Intel wants to get into premium smartphones from the likes of LG, Xiaomi, HTC, and others, it's going to need to follow Qualcomm and integrate a modem into its high-end applications processors.
I don't see any fundamental reason Intel can't do this; it's planning on releasing low-end and mid-range parts with integrated basebands next year. The question, then, is whether Intel will release a variant of its high-end 14-nanometer Broxton chip with an integrated modem (it's currently expected to be a stand-alone applications processor) or if it's just going to sit this round out.
Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Qualcomm. Try any of our Foolish newsletter services free for 30 days. 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.
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