Qualcomm Chips Might Get Dropped By Apple
Modem chips from Qualcomm might be dropped by Apple Inc. in favor of Intel Corp. As the supplier of modem chips in its next generation of iPhones.
Qualcomm has been a supplier of components to Apple for years, but the relationship turned sour last year when Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates.
Intel shares were up 1.4 percent, while Qualcomm’s shares fell 3 percent on Monday. The world's biggest PC chipmaker, Intel, was a late entrant into the market for mobile chips but has recently been pushing aggressively into space.
"There is speculation that Apple might drop Qualcomm altogether for its next-generation phones and I think that's part of the reason the stock is down today," said Angelo Zino, an analyst.
In a detailed note citing extensive channel checks with chip suppliers, it was anticipated that Apple would drop Qualcomm in favor of a handful of other suppliers, as it seeks to reduce materials costs for iPhones.
Brokerage Nomura Instinet said it believed Apple would source all of its thin modems - half of which are currently supplied by Qualcomm - from Intel.
Qualcomm issued a revenue forecast last week that missed estimates. It said the forecast already included the assumption that Apple could drop its chips for future products. Apple will save more than $100 million in the next iPhone cycle by moving to cheaper Intel modem chips.
Broadcom, which is trying to acquire Qualcomm, will likely lose some $400 million worth of sales of Apple parts in the second half of the year to Qorvo Inc.
The reports came as Broadcom on Monday sweetened its bid to buy Qualcomm to more than $121 billion from an earlier $103 billion.
Intel began supplying modem chips to Apple from the iPhone 7 onwards. In October last year, Apple had designed iPhones and iPads that would drop chips supplied by Qualcomm.
Apple and Intel declined to comment. Qualcomm did not immediately respond to a request for comment.
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