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How Apple Could End up Working for Qualcomm

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Qualcomm’s space in iPhones

As the dispute between Apple (AAPL) and Qualcomm (QCOM) continues to heat up, Apple’s contract manufacturers keep sourcing more chip supplies from Qualcomm for the next iPhone.

In this way, Qualcomm could end up claiming more sockets in the iPhone 8 than it did in the iPhone 7 as Apple works to challenge Samsung (SSNLF) and other competitors. Notably, iPhone shipments missed expectations in fiscal 2Q17.

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In a recent note to investors (cited by StreetInsider) Jun Zhang of Rosenblatt wrote: “We were surprised to recently learn that Taiwan Semi largely increased its wafer booking from Qualcomm. In our view, Apple had no choice but to use Qualcomm’s solution to match the upload speeds of Samsung’s S8 in North American and European markets.”

Qualcomm could reap big from iPhone 8

Taiwan Semiconductor (TSM) is the Taiwanese company that manufactures iPhones on behalf of Apple. In the production of the iPhone 8, Apple’s flagship smartphone this year, TSM has apparently been adopting more Qualcomm chips than it did for the iPhone 7. More Qualcomm chips the iPhone 8 would translate to more revenues (QQQ) for Qualcomm.

The iPhone 8 is expected to be radically designed, as Apple seeks to jumpstart growth in its most important business. This revenue opportunity for Qualcomm could be huge if more of its chips are, in fact, in the handset.

Rosenblatt’s Jun Zhang also believes that Qualcomm could gain leverage in the patent litigation with Apple if the coming iPhone 8 doubles down on the use of Qualcomm’s technology.

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