As it has in the past, Apple is using Qualcomm modem chips in some of its next generation iPhones, and Intel Corp.'s (INTC) - Get Report modems in others. But Apple is throttling the performance of the Qualcomm modems, or turning off features of the modem that make them more advanced than Intel's, in order to maintain consistent performance across all of its devices.
Apple has traditionally opted not to rely on a single supplier for components, so the likelihood of it moving to all-Qualcomm powered iPhones is unlikely, and that's particularly the case given the two companies' ongoing dispute. Earlier this year, Apple sued the company for $1 billion and claimed that Qualcomm was charging unfair prices for licensing its chips and has maintained an illegal monopoly over the market. In turn, Qualcomm has sought to have the U.S. International Trade Commission ban imports of some iPhones on the grounds of patent infringement.
Apple likely chose to keep using Qualcomm's modem chips because, for now, it is the only firm that makes chips capable of working on Verizon (VZ) - Get Report and Sprint's (S) - Get Report evolution-data optimized (EVDO)/code-division multiple access (CDMA) networks.
"Last year, Qualcomm supplied the baseband to CDMA versions of iPhone and Intel supplies basebands to global system for mobile communications (GSM) versions, and based on information available at launch, that doesn't appear to change this year," said Raymond James analyst Chris Caso. "Intel's baseband does not currently support CDMA -- therefore the GSM versions of iPhone still won't work on CDMA networks such as Verizon, Sprint, at Japanese carriers, or at China Telecom."
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That said, Qualcomm won't be the only supplier equipped for the EVDO/CDMA standard forever because Intel's XMM 7560 modem is equipped to do so. The 7560 likely won't be available for iPhones until 2018, however.
There are some major downsides to Apple sourcing some of its modem chips from Intel, however. The move means that many of Apple's latest iPhones will not be able to access Gigabit LTE, an advanced form of 4G wireless technology that cellular carriers use to connect smartphones. Gigabit LTE promises super fast download speeds and extremely clear streaming quality.
Intel is still working to produce chips that can access Gigabit LTE, while Qualcomm's X16 LTE modem already is capable of doing so. Still, Apple made no mention of Gigabit LTE technology on Tuesday.
"Apple's product presentation yesterday did not include any reference to Gigabit Class LTE speeds, which likely implies that it is crippling the functionality of Qualcomm's latest chip capabilities to keep it at parity with Intel," said BTIG Research analyst Walt Piecyk in a note to clients on Wednesday, who added that this makes Intel a "likely winner."
Ultimately, this all means that Apple might fall short of its competitors, which already boast gigabit download speeds.
"If Android phone makers like Samsung (SSNLF) , LG, Moto and HTC can effectively market their advantage of having Gigabit LTE, I can see them gaining ground," said Patrick Moorhead, president of Moor Insights & Strategy. "Samsung didn't leverage this advantage at first, but since the launch of the Note 8, I have seen some increased aggressiveness."