Could Intel Undercut Apple Supplier Qualcomm In iPhone 7?
Intel ‘s ( INTC ) dogged mobile pursuit — to the tune of “billions of dollars” lost — will pay off with an Apple ( AAPL ) iPhone 7 modem chip, a Barclays analyst wrote Monday as he downgraded modem rival Qualcomm ( QCOM ). Radio-frequency systems supplier Qorvo ( QRVO ) wins in the Intel model, scooping rival Skyworks Solutions ( SWKS ), Barclays analyst Blayne Curtis wrote in a research report. But Intel’s Apple iPhone share will likely be a minority, with 10%-20%, as a second source. The No. 1 chipmaker Intel hasn’t been used in an iPhone since the 2008 3G iteration. Apple last dual-sourced a key component — the processor — in the iPhone 6S, pitting Taiwan Semiconductor Manufacturing ( TSM ) against Samsung. Samsung has since backed off the A10 processor, yielding to Taiwan Semiconductor, analysts say. Midday on the stock market today , Qualcomm stock was down more than 1.5%, while shares of Intel and Apple were little changed. Skyworks stock was up 0.8%, while Qorvo stock was down 0.4%. Figuring on 20% share of the iPhone 7, Intel would add 3 cents earnings per share ex items per quarter vs. a 13-cent Qualcomm decline, Curtis wrote. Curtis downgraded Qualcomm stock to equal weight from sector weight and cut his price target to 50 from 55. “We clearly underestimated Intel’s ability to lose billions of dollars in this pursuit of mobile, but we also thought Qualcomm would make a larger effort to monetize the modem business it still has,” Curtis wrote. Qualcomm likely won’t be able to innovate back to 100% share of the iPhone modem business, Curtis wrote. Its faster modem, the Snapdragon 820, comes with a lower average sales price and higher costs. “If Qualcomm can’t fix that problem, then this would be bad business for both companies unfortunately,” Curtis wrote. On the radio-frequency side, Qorvo wins in the Intel model, gaining 3% share vs. its iPhone 6S offerings, he wrote. In an 80%/20% Qualcomm-Intel split, Qorvo gets a pair of power amplifiers and the envelope tracking chip, undercutting Skyworks. Curtis forecasts Qorvo’s iPhone 7 share to rise 3% to $4.92 vs. $4.80 in the iPhone 6S. He boosted his price target on Qorvo stock to 50 from 46. But even at 50% penetration for Intel, which he calls unlikely, Skyworks still gains share, Curtis wrote. At the 80%/20% split, he expects Skyworks’ iPhone 7 chip content to rise as much as 20% to $6.82 per phone, up from $5.69 in the 6s. Curtis sees Broadcom ‘s ( AVGO ) contribution growing 27% in the iPhone 7 to $8.05 worth of content, vs. $6.35 in iPhone 6S. A three-year supply agreement between Broadcom and Apple will likely leave Qorvo, Skyworks and Japan’s Murata Manufacturing scrambling for share, he wrote.