In a recent note, Northland Securities analysts claimed that Intel (NASDAQ:INTC) will be one of two suppliers of stand-alone cellular modems to Apple (NASDAQ:AAPL) for its upcoming iPhone 6s. This development, if true, would likely be viewed as a positive for both Intel's mobile chip business and for Apple as the latter might be able to get better pricing as a result of competition between suppliers.
On the flip side, this development seems a negative for Apple's current (exclusive) modem supplier, Qualcomm (NASDAQ:QCOM), as the mobile chip giant would lose units and revenue as a result of such a move on Apple's part.
That said, it seems as though it may be premature for Intel bulls (and Qualcomm bears) to declare victory as a new report from DigiTimes, citing "industry sources," claims that Qualcomm will remain the sole supplier of cellular modem chips for the iPhone 6s/s Plus.
Intel may be in the running for the 2017 iPhone
DigiTimes' sources claim that Intel won't be able to nab modem orders for the coming iPhone, but they apparently indicated that Apple wants to bring additional modem suppliers into its iPhone supply chain. This, DigiTimes reports, means that Intel might be in the running to supply modems for the 2017 iPhone.
This might make a lot of sense
As DigiTimes points out, Intel's XMM 7260 -- the Intel part that is the rough equivalent to the Qualcomm MDM9x35 that is expected to ship as part of the iPhone 6s/6s Plus -- is built on TSMC's 28-nanometer manufacturing technology.
In contrast, Qualcomm's MDM9x35 -- which component leaks suggest will be included in Apple's upcoming iPhones -- is built on TSMC's more compact and power-efficient 20-nanometer manufacturing technology.
For the 2016 iPhone, Intel could offer its XMM 7360, which is also built on a 28-nanometer foundry process. Although the XMM 7360 is rated for the same peak download and upload speeds that Qualcomm recently announced for the MDM9x45, the newer Qualcomm part will again have a manufacturing technology advantage over the 7360 as it, too, is built on a 20-nanometer manufacturing technology.
When it comes time for Apple to launch its 2017 iPhone, Apple should be able to choose offerings built on 14/16-nanometer manufacturing technologies from both cellular modem vendors.
If we assume that Intel's 14-nanometer technology is roughly on-par with foundry 14/16-nanometer technology, then Intel and Qualcomm should be at node parity with their respective stand-alone modem offerings.
However, I believe Intel's 14-nanometer technology is more sophisticated than the various foundry 14/16-nanometer technologies, which would put Intel at a manufacturing advantage in this case.
Not a game changer, but winning the iPhone would be welcome to Intel investors
If Intel can deliver competitive modem architectures on best-in-class manufacturing technology, then it could have a reasonable chance of winning some of Apple's stand-alone modem business. It's not a "game changing" business for Intel and, frankly, I'd be surprised if Apple didn't eventually build its own modems into its A-series applications processors.
That said, even if the long-term outlook for stand-alone modems from merchant vendors isn't great, Intel's struggling mobile business could still really use the revenue and gross profit dollars from such a win as it attempts to build a competitive family of integrated applications processors and modems.
If Intel is eventually successful in doing so, then it should be able to more than offset the potential loss of stand-alone modem shipments to Apple with shipments of integrated applications processors and modems into the rest of the smartphone market.