Apple Inc. Deal Could Get Intel Corporation $1.5B In Revenue

Apple Inc. Deal Could Get Intel Corporation $1.5B In Revenue
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Intel lost billions of dollars after it missed the mobile boom, but it looks like it could be getting some major help from Apple. The world’s largest chip maker has possibly won a deal for its chips to be in more than half of the upcoming iPhone 7 models, according to market research firm Cowen & Co.

Not a big win in revenue  but in profits

On Monday in a note, Cowen analysts wrote that recent field checks suggest that Intel’s modern chips are going to be used in more than half of the new iPhones slated for release later this year. This 50% share is substantially higher than the 25% Cowen estimated last month when it first reported that the chip maker would be powering the new iPhones.

Apple’s deal is expected to bring an additional $1.5 billion in revenue for the chip making giant, estimates the research firm. Cowen points out that since Intel has the mobile chip development technology already in place, it will not cost a whole lot to supply the modem chips to the Cupertino-based iPhone maker. This means nearly half of the revenue, or $850 million, could go directly to operating profits.

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However, the $1.5 billion in additional sales does not really create much impact on the world’s largest chip maker, which generated over $55 billion in revenue last year. However, the iPhone deal is still a big win for Intel, given it never really had any substantial success in the mobile space.

A “psychological win” for Intel

In the report, Cowen noted that this is a big “psychological win” for the chip maker as it could potentially expand to other deals as well. For instance, the chip giant could provide foundry support, meaning it could start manufacturing the actual chips for the iPhone maker as well.

Referring to Intel’s Client Computing Group (CCG), which includes the mobile chip and PC business, in the note, Cowen writes, “While this is certainly a meaningful number, the psychological effect for INTC is even greater as it opens up an entirely new non-CCG narrative… This move is to us, very strategic as Intel could, over time, allow Apple to integrate Intel’s modem technology together with Apple’s Application Processor and eventually use Intel foundry to make the chip and cut Qualcomm out entirely.”

Recently, Intel CEO Brian Krzanich mentioned connectivity and 5G as one of the main pillars of Intel’s future business. This means that it could be on the lookout for additional deals after the iPhone partnership.

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