Future iPhones could feature Intel processors, say analysts, as chipmaker embraces ARM

Analysts are suggesting that Apple might in future buy the A-series chips it uses in iPhones and iPads from Intel, following an interesting turnaround by the chipmaker this week, reports Fortune.

Intel has long offered foundry services in which they manufacture chips designed by customers, but that service has so far been limited to chips based on its own architecture. As of this week, however, the company has announced that it will also be able to produce ARM-based chips. This would allow Intel to compete with TSMC and Samsung for Apple’s iPhone and iPad chip business …

Apple licenses ARM architecture to design its own A-series chips for iPhones and iPads. It has historically commissioned TSMC and Samsung to make these chips, though increasingly moving away from Samsung: TSMC is reported to be the only manufacturer of processors for the iPhone 7, and perhaps also for the iPhone 8.

Intel coming on board as an ARM chipmaker creates two very good reasons for Apple to consider it as a future supplier. First, Apple generally likes to have a diverse supply-chain, to avoid becoming dependent on a single supplier. Second, commissioning both Mac and iOS device chips from Intel would give Apple additional bargaining power for both product lines.

“Apple likes diversification in case there is a supply issue,” Counterpoint Research director Neil Shah says, noting that Tim Cook is known as a supply chain guru. “Apple can also use it as leverage to bargain Intel chip pricing for its Macs and so forth.”

Other analysts agree that Intel will be targeting Apple’s A-series chip business, though noting that it would have to work hard on pricing to be competitive – Apple is renowned for driving hard bargains with suppliers.

“We believe these updates were modest positives and estimate the key customer win that could really move the needle would be a foundry win at Apple,” UBS analyst Stephen Chin wrote on Wednesday. “Another uncertainty is how aggressive could Intel be with its foundry pricing to win new customers.”

Fortune notes that there are other question-marks also.

ARM has licensed limited capabilities to Intel, so highly-customized designs such as Apple’s may not be included. Also, Intel expects to start making 10 nm scale chips next year, but it has already had scheduling setbacks and its latest high-end PC chip family, known as Kaby Lake, is being made at the older 14 nm scale.

Given the lead-times involved in such contracts, it is not expected that Intel would be in a position to produce A-series chips any earlier than 2019. In the meantime, it’s been reported that there will be one Intel chip inside the iPhone 7: the LTE modem.