Apple’s 2018 iPhones Could Exclusively Use Intel Modems Freezing Out Qualcomm

Apple's ongoing rift with Qualcomm could see the company turn to other manufacturers to supply high-speed LTE modems for its iPhone products. It was rumored in December of last year that Apple was considering MediaTek as a possible partner, potentially splitting LTE modem orders between Intel and MediaTek, and now there is talk of Apple going exclusive with Intel. In either scenario, Qualcomm would be left on the sidelines.

KGI Securities analyst Ming-Chi Kuo wrote in a research note to investors that he believes Intel will be the sole supplier of iPhone modem chipsets by the second half of the year. Previously, Kuo said he expected the orders would be split between Intel and Qualcomm, with Intel supplying 70 percent of LTE modems and Qualcomm getting the remaining 30 percent. Now he believes Apple is going all-in with Intel.

"We expect Intel to be the exclusive supplier of baseband chip for 2H18 new iPhone models, while Qualcomm may not have a share of the orders at all," Kuo wrote.

One reason this is now a possible scenario is because Intel's XMM 7560 modem supports both GSM and CDMA networks. This means a single iPhone model could serve all the major wireless carriers, including AT&T, Sprint, T-Mobile, and Verizon. Intel's previous chipset did not support CDMA, so it was not possible to kick Qualcomm to the curb entirely.

Apple is also motivated to move on from Qualcomm. Around this time last year, Apple filed a lawsuit against Qualcomm alleging it owed $1 billion in back payments, and accusing the company of "charging royalties for technologies they have nothing to do with."

"To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1B in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them," Apple said at the time.

More recently, the European Commission smacked Qualcomm with a $1.2 billion fine for abusing its dominant market position in LTE baseband chipsets. The European Commission took issue with those hefty payments, saying Qualcomm effectively shut out its rivals by paying companies like Apple to exclusive use its chipsets.

"Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance. Qualcomm paid billions of U.S. Dollars to a key customer, Apple, so that it would not buy from rivals. These payments were not just reductions in price—they were made on the condition that Apple would exclusively use Qualcomm's baseband chipsets in all its iPhones and iPads," European Commissioner Margrethe Vestager said in a statement.

The European Commission also stated that Apple had at one time given "serious consideration" to buying from Intel, but decided against it because of the agreement it signed with Qualcomm.