A new report from The Wall Street Journal claims that Apple (AAPL -4.04%) plans to design longtime cellular modem supplier Qualcomm (QCOM -1.81%) out of the iPhones it plans to introduce next year.
Though the authors of the report caution that Apple's component sourcing plans could remain in flux until as late as June, The Wall Street Journal's sources reportedly said that "Apple hasn't previously designed iPhones and iPads to exclude Qualcomm chips at a similar stage of the process.
Image source: Apple.
What does this mean for Qualcomm, Apple, and others? Let's dig in.
The big winner
The company that stands to gain most if Apple designs Qualcomm out of next-generation iPhones is chip giant Intel (INTC -0.25%), which supplied cellular modems for certain versions of the iPhone 7-series, iPhone 8-series, and iPhone X smartphones, splitting the orders with Qualcomm.
Apple couldn't completely ditch Qualcomm over the past several iPhone generations because the Intel modems it has used so far haven't supported a wireless standard known as CDMA. Several major wireless networks use CDMA, including Verizon and Sprint. However, Intel's upcoming cellular modem, known as the XMM 7560, finally adds CDMA support as well as some other features that bring its feature set closer to Qualcomm's modems. This opens the door for Apple to cut Qualcomm out and go all-in on Intel -- if that's Apple's intention.
Don't bet on MediaTek, though
The authors of the report also indicate that Apple, in a bid to source cellular modems from two vendors, might add Taiwan-based chipmaker MediaTek to the mix as well. I don't think MediaTek can supply competitive modems for the 2018 iPhones, for a few reasons.
First, MediaTek's latest cellular modem technology, which is integrated into its Helio line of applications processors, can only handle LTE downlink speeds of 450 megabits per second and uplink speeds of 150 Mbps. That's about on par with the modems Intel supplied to Apple for the iPhone 7-series smartphones.
Next, it's not clear how much MediaTek is even investing in building standalone LTE chips. Qualcomm builds such chips because it has customers, like Apple, willing to buy them. Ditto Intel. MediaTek, on the other hand, generates its mobile revenue from sales of applications processors that integrate its modem technology. I could see MediaTek putting the effort in to build standalone modem chips if it felt it had a high chance of winning orders from Apple, the only major smartphone maker that uses standalone modems. But it might not be worth the risk to MediaTek for anything less than virtually guaranteed orders.
I just don't see MediaTek having either the right technology or the right business incentives to put the work in for the mere possibility of wining standalone modem orders from Apple.
One Fool's opinion
I have no doubt that Intel is going to be extremely aggressive about trying to win as much cellular modem business at Apple as it can, particularly as this is Intel's best shot at growing its mobile-related revenue.
That said, it'd probably be risky for Apple to completely dump a reliable supplier like Qualcomm altogether. The right move for Apple would probably be a slow phase-out of Qualcomm from the iPhone supply chain by increasing the percentage of modems it buys from Intel and decreasing how much it buys from Qualcomm.
Then, if Intel shows over the course of several more generations that it's a reliable supplier, Apple can pull the plug on Qualcomm and go all in on Intel.
