Intel’s mobile business
Intel (INTC), a leader in the PC and server processor market, entered the mobile market in 2011 with the acquisition of Infineon Wireless. Infineon products lagged behind in technology, which pushed Intel behind Qualcomm (QCOM) in the modem market. After spending a huge sum on research and development and divesting its mobile processor business, Intel launched competitive modems that were one year behind Qualcomm in terms of technology.
Intel’s collaboration with Apple
The breakthrough for Intel’s mobile business came in 2016 when Apple (AAPL) selected Intel as the secondary modem supplier after Qualcomm. Intel supplied modems for GSM (global system for mobile communication) versions of Apple’s iPhone 7 and 7Plus, which launched in 2016, and iPhone 8 and iPhone X models, which launched in 2017. Intel’s share was smaller with Qualcomm bagging the majority of orders.
However, an ongoing licensing dispute between Apple and Qualcomm saw the iPhone maker ditch Qualcomm’s modem chips completely in 2018. In the fiscal Q3 2018 earnings call, Qualcomm stated that it would lose Apple’s modem business to a rival. Intel is believed to be the sole modem supplier for the new iPhones.
Moreover, Apple has discontinued its iPhone SE and 6S models, making the iPhone 7 its entry-level phone. This move could help Intel increase its share in the modem market as the iPhone 7 was the first iPhone to use Intel’s modems. However, some iPhone 7 and 8 models would still use Qualcomm modems.
Impact of Apple’s iPhones on Intel’s earnings
Intel reports its mobile business in CCG (client computing group), which is subdivided into the platform, which includes sales of PC processors, and adjacent products, which includes sales of mobile products.
Intel’s revenue from adjacent products rose 60% sequentially in fiscal Q3 2016 when it secured orders for some of Apples iPhone modems. As Intel takes up a greater share of Apple’s modem orders, this revenue is expected to increase 15% YoY to around $840 million in fiscal Q3 2018 and $1 billion in fiscal Q4 2018.
Next, we will look at LG Display and Qorvo.
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