Apple Replaces Qualcomm, Turns to Intel for Some Chip Orders

On May 17 Patently Apple was first in the Apple community to report that Intel had reportedly won Apple’s modem chip business for about 50% of Apple’s iPhone 7.

On an earnings call in April, Qualcomm Chief Executive Officer Steve Mollenkopf said he was assuming that a major customer would switch to multiple suppliers. Intel shares climbed 0.6 percent to $32.12. In 2013, outgoing CEO Paul Otellini revealed that the chipmaker had passed on the opportunity to put Intel silicon in the original iPhone.

Apple has reportedly turned to Intel to supply chips for some versions of its iPhone, signaling an attempt by the tech giant to diversify its supplier base.

Although Intel will gain some modem revenue at Qualcomm’s expense (though the amount of revenue at stake here likely isn’t enough to have a meaningful impact on the fortunes of either company), the real victor here, in my mind, is Apple.

AT&T will sell an estimated 22 million iPhones this year and 23 million in 2017, according to Walt Piecyk, an analyst at BTIG LLC. During the same periods, Verizon will ship 21 million and 22 million iPhones, respectively. The company dominates the shrinking PC market, but so far it hasn’t been able to make much money from smartphones. Qualcomm chips will still power iPhones made for the Chinese market as well. Samsung, for instance, uses Qualcomm chips in many of its flagship phones but also sells some models with its own processors. Once Intel has an alternative that could conceivably replace Qualcomm-built modems in all iPhones (not just a subset), Apple could conceivably exert additional pricing pressure on Qualcomm. Mollenkopf said his company’s chip business performance will continue to improve in the second half of 2016 regardless.

The move by Apple to buy some chips from Intel has been rumored for quite a while.