Apple Chooses Intel Over Qualcomm As Main Component Supplier

Shares of QUALCOMM, Inc. (NASDAQ: QCOM) were trading lower by nearly 2 percent on Friday after Bloomberg reported Apple Inc. (NASDAQ: AAPL) will now use Intel Corporation (NASDAQ: INTC)'s modem chips for a future iPhone.

Intel's contract win implies it will mostly replace Qualcomm as part of Apple's supply chain. The contract win also represents Intel's first major mobile win.

Bloomberg, citing "people familiar with the matter," noted iPhones that will be sold in China will still contain Quaclomm's chips. Nevertheless, by selecting Intel, Qualcomm is being "shot in the arm" and its status as a dominant player in the components business will be questioned.

Related Link: Have You Ever Wondered How Intel Chips Are Made?

On the other hand, Stacy Rasgon of Sanford Bernstein told Bloomberg that Qualcomm's modems are superior to Intel's in performance when measured by how much data they can get from the network onto the smartphone.

Regardless, investors should be surprised that Qualcomm lost a major client in Apple.

Qualcomm's CEO Steve Mollenkopf said in a conference call in April that the company was operating under the assumption it will lose a major customer. Regardless, the executive said that the chip business will continue to show signs of improvements in the bottom half of 2016.

Intel spiked higher Friday morning and traded recently at $32.15.