If Apple does buy Intel's modem unit for roughly $1 billion, as the Wall Street Journal reported late on Monday that it's in advanced talks to do, Qualcomm may end up losing out on sales of its own 5G modem chips to Apple. Apple is reportedly looking to bring production of the chips for its iPhones in house; it has historically looked for opportunities to build its own device chips, cutting out chip suppliers. "This would be a clear 'doubling down' on 5G which remains at the centerpiece of the company's smartphone future with these chip assets giving Apple further control over its supply chain and core chip design," Wedbush Securities analyst Dan Ives wrote in a note on Monday evening.
Qualcomm shares were trading down 1.84% to $74.55 in early morning trading on Tuesday.
For Qualcomm, "AAPL building its own modems would certainly weigh on future QCOM revenues, particularly given AAPL's propensity to fully replace 3rd party suppliers when internal parts prove adequate," Ives said.
Still, it's not immediately obvious that Apple would be better than Intel at developing 5G modem chips. "As far as QCOM goes, the eventual impact (if such a deal happens) would depend on whether AAPL can be more successful in developing a viable modem solution, on a suitable timeline, vs. Intel's abortive efforts," Alliance Bernstein analyst Stacy Rasgon wrote in a note on Tuesday morning.
Apple would, however, have one key advantage over Intel: "We note that AAPL would not be burdened (unlike Intel) by the need to create a profitable standalone business out of it, and in general we have been impressed over the years by AAPL's homegrown semiconductor efforts," Rasgon said.
Intel investors applauded the news of the potential deal, with shares rising 0.43% to $51.57 in Tuesday trading. Apple shares were up 0.23% to $207.71.