We’ve been hearing for quite some time that Intel might supply some of the modem chips for the iPhone 7, and that rumor is being repeated yet again, this time with more substance. Apple will reportedly use Intel chips for the iPhone 7 models that run on the AT&T network in the U.S. and for some other models that will be made for international markets.
Apple to diversify supply chain for iPhone 7
The move by Apple is significant for Intel and for Qualcomm because it means that Qualcomm will lose some orders, Bloomberg reported on Friday. The media outlet cited unnamed sources for the information about Intel’s chips being inside the AT&T iPhone 7 models. The iPhone 7 phones that will run on the Verizon network will continue to have Qualcomm chips. Also the models that will be made for the massive Chinese market will continue to have Qualcomm chips, said Bloomberg.
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Qualcomm is the only supplier of chips for current iPhone models, so adding Intel to the supply chain enables Apple to diversify it. Qualcomm executives warned investors on the April earnings call that they believed one of their big customers was planning to diversify its supply chain, which would cause the company to lose some business. The company also makes chips for Samsung, which already had a diversified supply chain.
iPhone 7 marks a big win for Intel
Intel’s mobile chip making business has not been doing well, so if the report about it winning a chunk of the chip orders for the iPhone 7 is true, it’s good news for the company. As Bloomberg notes, it’s the first big win for Intel in mobile chips, a segment which has been posting operating losses for quite some time. It’s also a big bite out of Qualcomm which has been the dominant supplier of baseband processors for some time, although the company still will keep the majority of the iPhone 7 chip orders.
Analysts expect AT&T to sell about 22 million iPhones this year and 23 million next year. Verizon’s iPhone installed base is a little smaller at an estimated 21 million this year and 22 million next year.
If Intel really did win some iPhone 7 chip orders, it would also mean that Apple is essentially returning to the maker of chips for its first iPhone model in 2007. Those modem chips were made by Infineon Technologies, and Intel later acquired the company’s wireless business. However, Apple switched to Qualcomm for later iPhone models because they had higher data rates. Since losing the iPhone contract, Intel’s chips have not been in any major smartphone.
Intel shares climbed by about 1% on Monday following the report about the iPhone contract win. As of this writing, the stock is at $32.34 per share going into Apple’s keynote speech at its annual Worldwide Developers Conference. Intel stock was one of only seven members of the Dow Jones Industrial Average that ended Friday in the green, as it was a brutal day for U.S. stocks. The index lost nearly 120 points.