For the past two product cycles, Apple has dual-sourced the modem inside the iPhone from two companies: Intel and Qualcomm. The decision to do so followed an extensive period in which only one company, Qualcomm, provided the silicon (Qualcomm paid Apple to only use its own modems from 2011 to 2016). Intel’s modems have generally lagged behind Qualcomm’s as far as features, and Apple has actually disabled some capabilities other vendors use so as to guarantee feature parity.
With Qualcomm having just been fined $1.2B for paying Apple to only use its chips, and Apple tangled in lawsuits with its supplier over licensing fees and royalty rates, it’s not particularly surprising Cupertino might be looking for an alternative modem supplier. KGI Securities analyst Ming-Chi Kuo, who has a reputation for excellent Apple prognostication, has released a research note claiming that Apple may not use Qualcomm at all. Macrumors received a brief note Kuo released, stating:
We expect Intel to be the exclusive supplier of baseband chip for 2H18 new iPhone models, while Qualcomm may not have a share of the orders at all.
Previously, Intel was expected to enjoy a 70 percent share of the modem market, compared with just 30 percent for Qualcomm. Another reason Apple can entertain an all-Intel shift is that Apple’s latest modem, the XMM 7560, finally supports both CDMA and GSM bands.
Qualcomm took an early leadership position in LTE when the technology hit and rode that wave since the standard started deployment. Elevated development costs and increased SoC integration reduced demand for standalone LTE modems, and companies that had previously brought 3G solutions to market either didn’t launch LTE products or didn’t capture enough of the market to compete effectively against Qualcomm. Intel began its own efforts after buying Infineon, but the lack of an integrated modem hurt its own efforts to win market share with Atom and contributed to its eventual withdrawal from that market.
Dropping hints that it could replace Qualcomm in the iPhone could also be a negotiating tactic. Samsung and the other Android manufacturers may dominate the market in unit sales, but Apple has the lion’s share of the profits and the single greatest halo effect. That doesn’t mean QC will automatically come to the table, especially if Apple’s preferred terms don’t make economic sense for the company, but it does give Apple room to maneuver.
Qualcomm might opt not to come to the table, for example, if it thought it was far enough ahead of the competition on 5G to force Apple back into negotiations in just a few short years, this time on its terms. Any temporary advantage Apple secures for itself could come back to haunt it if other companies have trouble bringing 5G to market while Qualcomm speeds ahead. Intel has been involved in 5G development, but writing a standard is one thing and bringing a top-end competitive solution to market is another. Qualcomm might choose to walk away from a deal and bet on beating everyone else to the punch rather than take a black eye to stay inside the iPhone.
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