According to Twitter user Notable Calls (via Bidness ETC), CLSA Securities claims that Intel (NASDAQ:INTC) will supply a "significant portion" (said to be 30%-40%) of the cellular modems into Apple's (NASDAQ:AAPL) next-generation iPhone, known as the iPhone 7. The information apparently comes from "Asian supply chain checks."
Additionally, CLSA apparently claims that the iPhone 7 represents a roughly $1 billion opportunity for Intel's struggling mobile group.
Should investors believe this report? Let's take a closer look.
If true, this would be a win for the XMM 7360
Intel's recently announced XMM 7480 modem will be too late to market for this particular win (sampling in the second half of 2016) and the company's fairly old XMM 7260 is roughly on par with the current-generation iPhone 6s/6s Plus modems, so if this report is true, this has to be a win for the Intel XMM 7360 modem.
According to Intel, the XMM 7360 supports LTE category 10, which suggests downlink speeds of 450 megabits per second and uplink speeds of 100 megabits per second. This would represent a substantial improvement over the Qualcomm (NASDAQ:QCOM) MDM9635 modem inside of the iPhone 6s/6s Plus, which supports 300 megabits per second download and just 50 megabits per second upload.
But is this likely?
There are a number of reservations I have about this potential win. The first is that if this is actually happening, Apple will have to build multiple versions of its phones for different regions. One for regions in which the CDMA standard is currently in use (i.e., North America) using a Qualcomm chip and then one for regions in which CDMA isn't used, which could use either the Intel chip or the Qualcomm chip.
Apple could certainly manage, but this would likely be something of a pain.
Another issue is that the "comparable" Qualcomm modem that Apple is likely to use is the MDM9645, which actually supports 600 megabits per second download speeds and 150 megabits per second upload speeds. Will Apple artificially "hold back" the iPhone 7's wireless performance to cater to the lowest common denominator, which in this case would be the Intel modem?
Finally, we all remember the recent "chip gate" controversy that Apple faced when it sourced applications processors from two different chip manufacturers.
Given that Intel's XMM 7360 is built on an older 28-nanometer chip manufacturing technology and the Qualcomm MDM9645 is built on a newer, more efficient 20-nanometer technology, the risk of having markedly different battery lives between the Intel-powered and Qualcomm-powered models would be quite real.
This would be a major win for Intel if true, but we'll have to see
At the end of the day, if Intel wants its stand-alone modem business to remain viable, it needs to supply Apple since it is the only major smartphone manufacturer that used stand-alone modems in all of its phones.
If Intel is able to win a big chunk of the iPhone 7 business, not only would this serve as a major morale boost for the team at Intel, but it would bring in much-needed revenue for its mobile business. This would also be a win for Apple, which generally likes to have multiple sources for things so as to reduce risk and potentially get better pricing from suppliers.
We'll have to see how it all unfolds, though. On the eve of the iPhone 6s launch, analysts from Northland Capital claimed that Intel won a full 50% of iPhone 6s/6s Plus modem business, but in reality, it won precisely zero.