Intel Worth $27 No Thanks to iPad
Apple (NASDAQ:AAPL) brought Intel (NASDAQ:INTC) on board to supply chips for its Macbook Pro after ten years of using its own chips in Mac notebooks. So prior to the Macbook Pro, these Mac sales were a missed opportunity for Intel. Can we expect to see Intel processors in next generation iPads or iPhones?
We think not. While Intel is the king of PC chips, the mobile market is much more competitive and since Apple has designed its own chips for the iPad, we don’t see Intel getting a piece of this market anytime soon. Our price estimate for Intel stands at $27.50, implying nearly 30% upside.
Apple Likely to Stick with its Own Processors in iPad
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The PowerPC processor was created by an alliance between Apple, IBM and Motrola (AIM) while Apple’s current iPhone and iPad processors are its own. As such, we think that Apple is likely to continue with its own processors because they are performing well and allows Apple to earn higher margins on these devices.
Though Intel is far and away the leading chip maker for the PC market, it’s not nearly as dominant in the mobile chips market. Therefore there is little incentive for Apple to shift to Intel until its chips can show much better performance.
Even if Apple shifts to third party-processors, there is no guarantee that Intel would gain this business given the formidable competition in mobile chips from other ARM-based players like Nvidia (NASDAQ:NVDA), Qualcomm (NASDAQ:QCOM) and Texas Instruments (NYSE:TXN).
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