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Why I'm Less Confident That Apple Inc.'s New iPhone Will Have Intel Corp. Inside

By Ashraf Eassa - Jan 13, 2016 at 11:30AM

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A mid-range iPhone probably wouldn't use Intel's latest, or even last-generation, modem.

A recent report from tech news website Fudzilla claimed that Intel (INTC 0.25%), whose efforts in the market for mobile processors have generally been less than inspiring, would win the cellular modem spot inside of Apple's (AAPL 1.14%) upcoming 4-inch iPhone refresh.

Up until now, it had been widely believed that Apple's next-generation 4-inch smartphone would feature flagship internal specifications (A9 processor, two gigabytes of LPDDR4 memory, etc.). However, a fresh report from Chinese website cnBeta (via MacRumors) suggests that the device will actually be more like an iPhone 6/6 Plus stuffed into a 4-inch metal casing.

If this is accurate, I am inclined to believe that Intel's chances of providing a cellular modem into this phone are quite low. Here's why.

Apple unlikely to use an iPhone 6s/6s Plus-class modem in such a device
The new 4-inch iPhone is expected to feature the same A8 chip and one gigabyte of system memory found in the iPhone 6/6 Plus, which -- if true -- would likely be for both cost (older components are cheaper) and segmentation (Apple wants to give people reasons to buy the latest flagships) reasons.

If this winds up being the case, then I see no reason for Apple to use the same cellular modem that it uses inside of the iPhone 6s/6s Plus or a modem with similar capabilities from an alternative supplier. Instead, I would expect Apple to largely carry over the wireless solution present in the iPhone 6/6 Plus.

Although Apple could technically source chips from Intel that offer roughly comparable download/upload speeds (the solution is known as the XMM 7160 and it was Intel's first LTE solution), the Qualcomm (QCOM 0.23%) MDM9625 baseband that Apple employed in the iPhone 6/6 Plus is superior in many ways to the comparable Intel XMM 7160 solution. Indeed, the XMM 7160 gained very little traction in the marketplace and Intel worked quickly to roll out its follow-on, the XMM 7260. 

All in all, if the upcoming 4-inch iPhone is really more along the lines of the iPhone 6/6 Plus in terms of internal specifications than the iPhone 6s/6s Plus, then I wouldn't count on Intel winning the spot.

We could learn more once Intel reports its financial results
Intel is reporting its financial results and guidance for the first quarter of 2016 on Jan. 14, which is just a couple of days away as of this writing. The new 4-inch iPhone is said to be in mass production right now at Foxconn. Since component vendors need to ship parts in advance of product launch, if Intel is inside of this new 4-inch iPhone, it is almost certainly shipping cellular modems as well as other companion chips to Apple as we speak.

Even if Intel were to win, say, just half of the order allocations for the new small iPhone, I'd imagine that this would still likely represent much higher volume orders than all of the company's other stand-alone modem orders combined. Such an order would likely lead to a meaningful boost in its mobile-related revenue and could even serve to help the chip giant narrow the still-significant losses that it's incurring in its pursuit of the mobile chip market.

If Apple's next iPhone really will have Intel inside, I think investors might be able to figure it out from Intel's first-quarter earnings results -- assuming, of course, that management provides an update on the revenue and profitability trends of its mobile business. 

Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool owns shares of and recommends Apple and Qualcomm. The Motley Fool recommends Intel. 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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