Qualcomm exec says Apple's next iPhones will stick to Intel modems

Posted:
in iPhone
Intel will be Apple's exclusive cellular modem supplier for next-generation iPhones, the CFO of Qualcomm indicated on Wednesday.

Mockups of Apple's 2018 iPhones.
Mockups of Apple's 2018 iPhones.


"We believe Apple intends to solely use our competitor's modems rather than our modems in its next iPhone release," said George Davis in a conference call. Apple's only other modem supplier in recent years has been Intel, which came onboard in 2016, supplying components for GSM versions of the iPhone 7 and other recent iPhone models.

Losing Apple as a client, if even just temporarily, could deal a serious financial blow. The iPhone is of course one of the most popular smartphone brands in the world, often leading in key markets.

Multiple reports have hinted at Apple going Intel-only, thanks largely to the latter's XMM7560 chip, which supports both GSM and CDMA carrier networks. The modem is now in mass production for 2018 iPhones, though until now it was uncertain if some phones would still use Qualcomm parts.

Apple has strong incentive to ditch Qualcomm, as the two companies are engaged in a global legal battle over patents and royalties. Apple began the war in January 2017 with a $1 billion lawsuit, claiming Qualcomm abuses its "monopoly power" to demand high royalties and force chip buyers to license patents. The chipmaker countered in April, and the pair have since lodged multiple complaints in domestic and international courts, roping in other Apple suppliers as well.

Until 2016 Apple was locked into an exclusive arrangement, but prior to the XMM7560, the technical superiority of Qualcomm's modems was another factor keeping the company from switching to Intel. On top of broader network support, Qualcomm chips have been faster, to the point that Apple throttled them to prevent major gaps with Intel-based hardware.

This fall should see three new iPhone models: 5.8- and 6.5-inch OLED devices, and a 6.1-inch LCD unit. The LCD phone could potentially ship later than its counterparts.
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Comments

  • Reply 1 of 25
    HeliBumHeliBum Posts: 70member
    They have nobody to blame but themselves. If they didn't charge such exorbitant licensing fees and didn't sue at the drop of a hat, Apple probably wouldn't be shying away from them.
    racerhomie3GeorgeBMacAlex1Nretired4good
  • Reply 2 of 25
    thttht Posts: 3,249member
    Intel better take advantage of this gravy train while it lasts. Like with the CPU, the GPU, various controllers, Apple is all but guaranteed to use a custom Apple designed cellular modem sooner or later. 

    At least Intel can sell fab capacity. All QC gets are FRAND residuals. 
    Fatmanmazda 3sSolirepressthisbrucemcAlex1N
  • Reply 3 of 25
    FatmanFatman Posts: 313member
    It will be interesting to see the benchmarks of Intel vs. Qualcomm. Specs point to Qualcomm still having an advantage. However the average buyer doesn’t even know what these chips are, nor do they care, and if Apple saves on royalty and chip costs to make phones a little cheaper that’s what counts to gain market share. Unfortunately Intel is not an industry leader their specialty chips and CPUs are big and inefficient relative to the competition. Apple is likely buying time before they have their own solution for both radios and CPUs!
    Alex1N
  • Reply 4 of 25
    mazda 3smazda 3s Posts: 1,577member
    Fatman said:
    It will be interesting to see the benchmarks of Intel vs. Qualcomm. Specs point to Qualcomm still having an advantage. However the average buyer doesn’t even know what these chips are, nor do they care, and if Apple saves on royalty and chip costs to make phones a little cheaper that’s what counts to gain market share. Unfortunately Intel is not an industry leader their specialty chips and CPUs are big and inefficient relative to the competition. Apple is likely buying time before they have their own solution for both radios and CPUs!
    Qualcomm was just crowing about this on Monday morning:

    https://www.qualcomm.com/news/onq/2018/07/23/over-million-user-initiated-tests-confirm-superior-cellular-performance-android


  • Reply 5 of 25
    anton zuykovanton zuykov Posts: 1,040member
    Fatman said:
    It will be interesting to see the benchmarks of Intel vs. Qualcomm. Specs point to Qualcomm still having an advantage
    Yeah, but is it worth it? Like, if the difference is 10-20 percent, then there is no difference. Plus, one of the manufacturers is a lot easier to work with...and it ain't Qualcomm.
    edited July 2018 radarthekatracerhomie3StrangeDaysAlex1N
  • Reply 6 of 25
    sflocalsflocal Posts: 4,698member
    Good.  Qualcomm deservers all the bitter taste it can get.  QC got cocky, and bit the hand that fed it.  QC can clamor all they want about whatever perceived performance advantage it has, in the end... the end-use will not notice one single thing, and QC's executive staff will have to spend a long time defending their jobs and pay grades and how they could screw up a very lucrative business with Apple.

    Intel dropped the ball back when the original iPhone came out, first with lacking a proper ARM chip, then fabbing chips for Apple.  Intel too was showing the same arrogance that QC is having right now.  Intel has an opportunity to make some serious change and better not squander this shot.

    I'll bet within 3-5 years Apple will have a roadmap for it's own baseband chip.  Intel is just a temporary stop along a long highway.  
    radarthekatracerhomie3anantksundaramGeorgeBMacAlex1Njony0
  • Reply 7 of 25
    radarthekatradarthekat Posts: 3,129moderator
    If a Qualcomm exec is saying no this in July, it’s oretty good information, as the engineering will have been completed and parts sourced a while back for Sept’s new line-up.  And he’s saying it because it’s material to their business and therefore shareholders have a right to know and Qualcomm has an obligation to reveal this information.  But most investors won’t react until it’s again brought up with the inevitable tear downs of the new iPhone models.   It’s then that it will dawn on the market that not only will Qualcomm not gain revenues from the new iPhone models but the day will have drawn much nearer that their revenue from older models still on sale will fall rapidly off a cliff.  For today there are at least Qualcomm chips in every iPhone model on sale, just split with Intel on a couple of the latest models. 
    edited July 2018 loquiturwonkothesaneAlex1N
  • Reply 8 of 25
    If a Qualcomm exec is saying no this in July, it’s oretty good information, as the engineering will have been completed and parts sourced a while back for Sept’s new line-up.  And he’s saying it because it’s material to their business and therefore shareholders have a right to know and Qualcomm has an obligation to reveal this information.  But most investors won’t react until it’s again brought up with the inevitable tear downs of the new iPhone models.   It’s then that it will dawn on the market that not only will Qualcomm not gain revenues from the new iPhone models but the day will have drawn much nearer that their revenue from older models still on sale will fall rapidly off a cliff.  For today there are at least Qualcomm chips in every iPhone model on sale, just split with Intel on a couple of the latest models. 
    "Most investors" don't move he market; institutional investors do, and institutional investors now have this information and will factor it into their valuation of Qualcomm.  Tear downs in a few months will have no impact of the Qualcomm share price.  That's my hypothesis anyway.  Let's wait and see what unfolds.
    anton zuykovradarthekatGeorgeBMacAlex1N
  • Reply 9 of 25
    wood1208wood1208 Posts: 2,006member
    Intel needs to keep up R&D and make sure it's modem don't fall behind Qualcomm in 5G rollout. Comparing Qualcomm vs Intel modem speed, bit slower up/download Intel modem speed doesn't impact real world usage in phone as overall response is determined by the cellular network's throughput.
    edited July 2018 GeorgeBMacdewme
  • Reply 10 of 25
    This will be a case study in business classes to showcase how shortsighted, short term goals can drastically damage long term sustainability. 

    Qualcomm will learn the hard way. We will see if it isn’t the beginning of the end. 
    GeorgeBMacAlex1N
  • Reply 11 of 25
    SoliSoli Posts: 9,256member
    tht said:
    Intel better take advantage of this gravy train while it lasts. Like with the CPU, the GPU, various controllers, Apple is all but guaranteed to use a custom Apple designed cellular modem sooner or later. 

    At least Intel can sell fab capacity. All QC gets are FRAND residuals. 
    That seems like a reasonable path. I assume Apple can make this more efficient, more secure, and less expensive by folding all of this into their A-series chips for the iPhone. Maybe future iPads will all end up being cellular-capable simply because it's part of the chip design.

    How does Watch Series 3 use cellular right now? It looks like it might be Qualcomm. I think this seems to be the most obvious place for Apple to use their own cellular HW because 1) they can fold it into the SiP and 2) the relatively low volume would likely make this a better testing ground than the iPhone.
    canukstormAlex1N
  • Reply 12 of 25
    entropysentropys Posts: 1,847member
    Good points Soli.
    Alex1N
  • Reply 13 of 25
    If a Qualcomm exec is saying no this in July, it’s oretty good information, as the engineering will have been completed and parts sourced a while back for Sept’s new line-up.  And he’s saying it because it’s material to their business and therefore shareholders have a right to know and Qualcomm has an obligation to reveal this information.  But most investors won’t react until it’s again brought up with the inevitable tear downs of the new iPhone models.   It’s then that it will dawn on the market that not only will Qualcomm not gain revenues from the new iPhone models but the day will have drawn much nearer that their revenue from older models still on sale will fall rapidly off a cliff.  For today there are at least Qualcomm chips in every iPhone model on sale, just split with Intel on a couple of the latest models. 


    Wouldn't this reflect on a quarterly earnings call before the teardown happens? I assume Apple would have paid for the chips before launching the iPhone (but after manufacturing starts).


    Alex1N
  • Reply 14 of 25
    michelb76michelb76 Posts: 100member
    And after that they will use Apple's own chips..And then it will be interesting to see the benchmarks.
  • Reply 15 of 25
    racerhomie3racerhomie3 Posts: 1,153member
    Good luck on your survival Qualcomm.
    GeorgeBMacanton zuykov
  • Reply 16 of 25
    thewormtheworm Posts: 3member
    Providing modem chips at a competitive price for a single-digit percentage of the market-in-units is not a trivial business, but it's not particularly important to Qualcomm's bottom line.  What is a big deal to Qualcomm's bottom line is the money it gets for patent licensing on percentage-of-phone-price terms, given that Apple is half of the cellphone market by revenue.  And that license revenue they get to collect whether or not Apple uses their chips . . . if they win their lawsuit.  (And it includes a whole lot of patents, including on things that have nothing to do with modems.)

    So, yeah, nobody at Qualcomm was going to compromise what is probably the single largest source of corporate profits in order to keep a few percentage points of a lower-margin business.
    IreneW
  • Reply 17 of 25
    viclauyycviclauyyc Posts: 366member
    I predicted the next Samsung AD will promote faster 4G download and upload speed compared to iPhone. 
    GeorgeBMac
  • Reply 18 of 25
    There are so many variables to this, I don't know how Qualcomm can really crow much about it.  I switched from Verizon earlier this year to T-Mobile.  My Verizon iPhone had the Qualcomm modem and the TMobile version has the Intel modem.  I know it's supposed to be slower, but my data speeds have been consistently faster with TMobile compared to Verizon.  That might not be true everywhere, but it is where I live and work.  The network, and specifically the network where you use your phone most of the time has way more to do with it than the modem.

    And am I mistaken or don't both of these modems exceed what most networks can even deliver to you consistently?  Sort of like having home internet that's 60Mbps and expecting that because your wifi router is capable of 1300Mbps, you'll see those kinds of speeds surfing the web.
    GeorgeBMacradarthekatdhawkins541Alex1N
  • Reply 19 of 25
    GeorgeBMacGeorgeBMac Posts: 5,135member
    tht said:
    Intel better take advantage of this gravy train while it lasts. Like with the CPU, the GPU, various controllers, Apple is all but guaranteed to use a custom Apple designed cellular modem sooner or later. 

    At least Intel can sell fab capacity. All QC gets are FRAND residuals. 
    Nah, I don't think so.  
    Apple has never been one for large scale vertical integration.  They have only taken manufacturing and design inhouse when they could add something that they couldn't get from an outside vendor.


  • Reply 20 of 25
    GeorgeBMacGeorgeBMac Posts: 5,135member
    Fatman said:
    It will be interesting to see the benchmarks of Intel vs. Qualcomm. Specs point to Qualcomm still having an advantage. However the average buyer doesn’t even know what these chips are, nor do they care, and if Apple saves on royalty and chip costs to make phones a little cheaper that’s what counts to gain market share. Unfortunately Intel is not an industry leader their specialty chips and CPUs are big and inefficient relative to the competition. Apple is likely buying time before they have their own solution for both radios and CPUs!
    I think it's more than simply getting modems cheaper from another vendor.
    Qualcomm thought they owned the smartphone and was endangering Apple's autonomy.
    ...  They over stepped their place and got themselves fired.
    Alex1N
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