Apple Inc’s next iPhone will use modems from Intel Corp, replacing Qualcomm Inc chips in some versions of the new handset, a move by the world’s most-valuable public company to diversify its supplier base.
Apple has chosen Intel modem chips for the iPhone used on AT&T Inc’s US network and some other versions of the smartphone for overseas markets, people familiar with the matter said.
IPhones on Verizon Communications Inc’s network will stick with parts from Qualcomm, which is the only provider of the main communications component of current versions of Apple’s flagship product.
Crucially for Qualcomm, iPhones sold in China will work on Qualcomm chips, said the people, who asked not to be identified because Apple has not made its plans public.
Representatives for all of the companies declined to comment.
Orders from Apple represent the first major win for an Intel mobile chip program that had struggled for relevance and racked up operating losses. The shot in the arm for the world’s largest chipmaker further dents the dominance of Qualcomm in baseband processors that connect phones to networks and convert radio signals into voice and data. While Qualcomm is losing some orders, it is retaining a major chunk of Apple’s business, offsetting concern that one of its largest customers would drop it completely.
AT&T is expected to sell 22 million iPhones this year and 23 million next year, BTIG LLC analyst Walt Piecyk said.
Verizon, which has a slightly smaller iPhone user base, is forecast to sell an estimated 21 million iPhones this year and 22 million next year, Piecyk said.
Apple sold more than 231 million units globally last fiscal year. The next version, due for release this fall, is expected to be called the iPhone 7.
Choosing Intel’s part for an important role in the product that generates about two-thirds of Apple’s annual revenue may represent a calculated gamble by the company. Bringing in second-source suppliers is a long-established practice by device makers looking to make sure they are in a better position to negotiate on price.
However, analysts such as Stacy Rasgon at Sanford C. Bernstein have said that Qualcomm’s modems remain ahead of Intel’s offerings in performance when measured by how much data they can get from the network into the phone.
Rasgon estimates that Qualcomm gets about US$15 per phone from Apple, or about US$3.47 billion in Apple’s past fiscal year.
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