Why Is Intel’s Deal With Apple Significant?

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According to reports, Apple’s next version of the iPhone used on AT&T’s network will feature Intel’s (NASDAQ:INTC) modem integrated circuit instead of Qualcomm. At a time when Intel’s PC segment revenues have been declining, this deal should provide some relief for the company. The growing adoption of smartphone and tablets around the world have negatively impacted the growth of PC sales, which declined by approximately 10% in 2015. Below we take a look at the impact this deal could have on Intel’s revenues:

INTC_Apple_Gains_

* Source:Bloomberg

**Source: Apple Insider. (Note: We assume a similar price trend for Apple baseband chips in 2016 and 2017)

Though the percentage gain in revenues for Intel isn’t quite significant, this deal represents a first major win for the company. Moreover, Intel being a late entrant into the smartphone chipset market, it has struggled to gain a foothold in this market and its chips have failed to gain traction among any major smartphone marker. This deal is a shot in the arm for Intel’s smartphone chipset ambitions. Going forward, we can expect more design wins for Intel, which can help it offset the declines in the PC segment.

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