Intel Chips Set To Power iPhone 7 And Microsoft's Surface Smartphone

LONDON -- Intel, which has been playing catch-up in the mobile chip market, could soon become one of the biggest players in the industry if reported deals with Apple and Microsoft work out.

According to a report from VentureBeat, Intel has created a team of more than 1,000 employees to work on delivering its new modem for Apple's iPhone 7 in 2016. According to the report, Apple has yet to officially sign any contract with Intel, but if the company continues to meet its delivery milestones for the much-lauded 7360 LTE modem chip, then Intel could have a major coup on its hands.

The company has struggled to gain a foothold in the highly lucrative mobile chip market with Qualcomm dominating the premium end while companies like Taiwan's MediaTek control a large part of the rest of the market. Intel, which has dominated the desktop computer market, has been unable to grab a significant slice of the market to date, but a deal with Apple would give it a major boost.

Intel already supplies chips for Apple's range of Mac desktop and laptop computers, but a mobile partnership would be a much more profitable one.

The report said Apple will dual-source the modems for its next iPhone, with Intel being one of those partners while Qualcomm will be the other. Qualcomm currently provides all modems for iPhones and iPads. Intel’s 7360 modem is due to begin shipping before the end of 2015 and will be seen in smartphones in the first half of 2016.

Apple has used Samsung, and more recently TSMC, to fabricate its A-series chips used to power its iPhones and iPads to date, but if Intel proves it can supply the LTE modem for the iPhone 7, then sources say that Apple could turn to Intel to build a new system-on-a-chip (SoC) in the future, which combines both the processor and LTE modem.

Intel recently confirmed that it would be adding support for CDMA networks to its new modem, which is key for smartphones that are sold in China with networks in that market using a mixture of LTE and CDMA technology.

As well as supplying parts for Apple's next iPhone, there are also reports that Intel is working with Microsoft on its next smartphone launch, which could be part of the Surface product range rather than its Lumia smartphone range. The Surface phone has been rumored for some time, but according to well-known Microsoft watcher Paul Thurrott, it will launch in 2016: "I have heard that Microsoft is indeed working on an Intel-based smart phone for 2016 that may or may not be marketed as a Surface rather than a Lumia."

The project is said to have the codename Project Juggernaut Alpha and reported hardware specifications include a high resolution 5.5-inch display, Intel’s Atom processor, a 21-megapixel lens and up to 4GB RAM. The Surface phone is said to feature the same industrial design language of the Surface tablets and is currently being tested internally by Microsoft staff.

The Surface phone is very unlikely to sell anywhere near the numbers Apple's next generation smartphone will, but for Intel, it is an important strategic partnership which will help its overall mobile chip business.

Intel has invested heavily in developing its mobile chip business and in July, CFO Stacy Smith said the company remains "on track to our annual goal of improving mobile profitability by $800 million, with about a third of the improvement realized to date."