Personal Finance

Is Qualcomm Slowly Losing Its Grip on the iPhone?

Being a parts provider for a bestseller like the iPhone can be a goose that lays the golden egg for a company; but it's not an easy status to protect. In this segment from the Industry Focus: Tech podcast, Dylan Lewis and Evan Niu take a look at Qualcomm (NASDAQ: QCOM) , the company behind the modem chips that connect iPhones to their cell networks and the internet. Find out why Apple (NASDAQ: AAPL) locked in getting their chips from Qualcomm for the last five years, as well as the foreseeable future.

The pair also discuss why other companies have not been able to work their way into this space, and what the company looks for in a partner/vendor. In addition, they talk about why Apple has kept things simple compared to some of its rivals, which comes with its own set of advantages.

A transcript follows the video.

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This podcast was recorded on May 27, 2016.

Dylan Lewis: There are two other companies that you wanted to talk about, Qualcomm and ARM Holdings . Qualcomm, provider of modem chips -- and it's the component that connects the iPhone to cell networks, provides the connectivity -- that access to the Internet. What do you have to say about them?

Evan Niu: Qualcomm, they have a few things in there. They have some modules, but I think the baseband processor is by far the most important. Qualcomm has had this spot locked down on the iPhone for five or six years. I can't remember exactly when they switched. I think they switched in 2010, or 2011 -- right after Intel bought Infineon is when they switched to Qualcomm exclusively. It's such an important piece, because obviously you need a cell modem to connect your phone to the cell network.

I think, for Apple specifically, one reason why Qualcomm was really able to lock it down is because they have the absolute best technology, and they can support the widest range of LTE bands. Apple likes to streamline their manufacturing, so they only have a couple of models of the iPhone. They can put this one modem in, and it'll basically work with any network in the world. Compared to something like Samsung, where they might have 12 or 15 different variants of the same phone with different modems that are set for different geographical regions, with different LTE bands. It's needlessly complex, and Apple just prefers the simpler approach, like "we're just going to have one," and maybe have two or three variants for different geographical regions -- but it's a lot simpler than 12.

Lewis: Yeah, it's a lot easier to hit scale with something that is a little bit more universal.

Niu: Yeah, exactly. I think they've done a really good job of being able to keep that spot, and staying ahead of competition. Although, there is now talk that Intel might get into the iPhone 7, which... that rumor's been around for years, so who knows if that happens this year or not. They might slowly be starting to lose their grip on it, but they've had a pretty good run with really maintaining that relationship. Apple and Samsung, I think a couple years ago, were half of Qualcomm's revenue. I mean, it's a big relationship.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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