Apple’s Cellular Modem Sourcing Strategy Depicts Criticism

Apple’s iPhone series of smartphones including the iPhone 7, iPhone 8, iPhone X, and 8 Plus use the cellular modem chips that are outsourced from the leading companies, Qualcomm and Intel. The company’s decision to source the modem chips from the two firms has made the company to be behind in the cellular capabilities drawing much criticism from various market analysts. Nevertheless, Qualcomm’s existing cellular modems are almost a generation ahead of the Intel’s in regard to the advertised features.

The company’s decision to out-source the cellular modems from multiple sources has been criticized by several analysts including Ryan Shrout from the Shrout Research who stated recently in the opinion piece that both Apple’s latest iPhone 8 and iPhone X bears a ‘performance deficit’ that could have a real-world impact compared to the current devices that use the Alphabet Inc.’s Android operating system.

Since the year is coming to an end, Apple should be planning to determine iPhone strategy for the next year. Apple has had a great year for its stock, with shares constantly trading high all the time and much is expected from them in the next fiscal year according to Shrout. The cellular modems play a major role in smartphones and without them, a cell phone can neither make calls nor access data if the device is far away from the Wi-Fi hotspot.

Therefore, Apple should ensure that they get a reliable source of cellular modems for their smartphones. However, Apple’s response to the criticism is that it’s not ideal for them to rely on a single supplier for such a crucial component and that its management team knows that having at least two reliable suppliers for cellular modem chips is critical in the long run.

Apple buys substantial quantities of modems from Intel to give it a compelling financial incentive to invest more in the modem technologies while reducing the supply from Qualcomm. If Apple wait to use Intel’s cellular modems alone considering that its technology is not at par with Qualcomm, it would not manage to beat the competition.

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