“Now that Broadcom has finally thrown in the towel on its cellular business after years of failing to succeed, the company is trying to shop around the division,” Ashraf Eassa writes for The Motley Fool. “The company’s management team claims that the product pipeline that was under development had significant technical merit, but that the economics of running that business just couldn’t support a $700 million-a-year operating expense run rate. That said, if Broadcom can successfully shop the business, Apple seems the most likely buyer.”
“Today, Qualcomm is the world’s leading cellular baseband development shop and holds the majority of the market. Qualcomm also happens to supply standalone cellular chips to Apple for the latter’s renowned iPhone and iPad product lines. While Qualcomm has been more or less the only choice for a leading-edge LTE baseband for several years, it would have been beneficial to Apple to have more than one supplier in the running — at the very least to keep prices under control,” Eassa writes. “However, with Broadcom bowing out of the race as a high-end baseband vendor, Apple’s only two choices appear to be Qualcomm and — if it can consistently execute to its cellular baseband roadmap — Intel.”
“With very few viable suppliers in the market, Apple will either be forced to stay a step behind the latest and greatest in terms of modem technology (taking advantage of the lower prices of more mature technology) or it suffers margin compression as it tries to adopt leading-edge features,” Eassa writes. “That said, what if Apple could take control of its own cellular destiny by picking up where Broadcom left off?”
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