Will Intel Get Another Shot at Apple’s iPhone?

Source: Thinkstock

Is Apple (NASDAQ:AAPL) about to enter a new supplier relationship with Intel (NASDAQ:INTC), or is the iPhone maker just playing one chip maker against another? In a recent research note to investors, Cowen and Co. analyst Timothy Arcuri claimed that Apple is currently in talks with Intel over the possibility of having the company supply the baseband processor for the iPhone 7.

Baseband processors handle the radio functions found in smartphones, like the connection to a wireless mobile network. However, Arcuri also suggested that the talks between the two companies may simply be Apple’s way of strengthening its bargaining position with current baseband chip provider Qualcomm (NASDAQ:QCOM), which produces baseband chips for Apple via Taiwan Semiconductor Manufacturing Co.’s (NYSE:TSM) foundries.

“Our work there continues to suggest some evidence AAPL has re-embraced INTC in a bigger way for discussions around iPhone 7 (2015) but we continue to feel this is ultimately more of a ploy to obtain pricing concessions from Qualcomm and AAPL is ultimately unlikely to choose INTC for iPhone 7,” wrote Arcuri in a note obtained by Barron’s. “Regardless, we believe this certainly lends credibility to INTC’s LTE baseband efforts.”

While Arcuri believes it is unlikely that Apple will ditch Qualcomm, chipmaker Broadcom’s (NASDAQ:BRCM) standing with the Cupertino, California-based company is less certain. Broadcom currently supplies the Wi-Fi/Bluetooth combo chip found in the iPhone. However, as noted by Apple Insider, Arcuri believes that advances made by Qualcomm in this area could eventually lead Apple to use it in lieu of Broadcom.