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It's been about five years since Intel (NASDAQ: INTC) had any meaningful slot in Apple's (NASDAQ: AAPL) iPhone. Previously, Apple had sourced cellular baseband modems from its Infineon wireless segment, which Intel acquired way back in 2010. But then Apple dropped Infineon and began exclusively sourcing baseband from Qualcomm (NASDAQ: QCOM) starting with the iPhone 4s in 2011, and has stuck with the mobile chip giant ever since.
Intel has fought for years to get back in, and rumors to that effect have swirled ahead of every iPhone launch. Well, it looks like Chipzilla has finally succeeded.
Investors won't know for sure until the new iPhones are shipped and subsequently torn down to see what components are inside. This usually occurs immediately within a day or two. But all signs point to Intel having won the GSM-equipped variants. Unlike in recent years where a single Qualcomm modem could handle just about any network you threw at it, you'll notice that this year half of the models do not support CDMA networks. Intel's 7630 modem fits the bill.
From a global perspective, GSM is generally far more widely used for 3G connectivity. But CDMA is important in the two largest smartphone markets: U.S. and China. Half of the domestic carriers use CDMA, while TD-SCDMA is prevalent in China, so Intel's win will be limited. That also has some potential implications for global travelers that need broader support.
Not only do the specs suggest that Apple is now dual-sourcing from Intel, but The Wall Street Journal's people ever familiar with the matter have also confirmed it. Intel has undoubtedly failed in the mobile market, but this win is a small consolation.
I'd also be worried about the negative implications for Qualcomm. Apple is one of Qualcomm's two most important customers, and Apple has undoubtedly been using this dual-sourcing strategy as negotiating leverage. To the extent that Intel can continue catching up with its baseband products, Apple will continue putting the squeeze on Qualcomm for volume concessions.
In less than a week, we'll know for sure whether or not there's Intel inside, but all signs point to yes.
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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Qualcomm. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. 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.