Reports: Apple Could Ditch Qualcomm For Intel

Apple Inc. AAPL's relationship with supplier QUALCOMM, Inc. QCOM could be one step closer to the end. 

What Happened?

Qualcomm's status as a key component supplier to Apple's iPhone may be one step closer to coming to an end, Barron's reported. Qualcomm supplies Apple with modems that support CDMA, but Qualcomm's products are more expensive than Intel Corporation INTC's rival modems, which can fulfill the same purpose within Apple's ecosystem.

The reason for a shift from Qualcomm to Intel could be attributed to Apple's earnings report last week, which suggests demand for the iPhone X is short of Apple's original expectations, Barron's said, quoting Instinet analyst Romit Shah.

With many consumers unwilling to pay more than $1,000 for a smartphone, Apple must cut costs "in an effort to preserve profits," Shah said.  

A shift to Intel saves Apple roughly $105 million cycle-over-cycle, but using Intel's modems across all iPhone devices gives Apple "leverage" against Qualcomm in the ongoing licensing dispute, according to Barron's. 

Why It's Important

Apple supplier Broadcom Ltd AVGO is simultaneously seeking to acquire Qualcomm and presented a revised acquisition proposal Monday. But Broadcom also faces risks of being left out of the Apple ecosystem and could lose the "PAD" filter socket in the LCD version, Shah said, according to Barron's. Similarly, Apple could shift from Broadcom to rival Qorvo Inc QRVO, saving the iPhone-maker $100 million in costs and creating a $400-million headwind for Broadcom.

What's Next?

Qualcomm shouldn't be counted out of Apple's ecosystem forever, according to CNET. The company's 5G technologies are likely more advanced than Intel's, which would put Qualcomm in a competitive position to supply Apple in the future, CNET said, quoting analysts from KGI. 

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Photo courtesy of Apple.