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Why Apple Inc. (AAPL) – Intel Corporation (INTC) Modem Chip Deal Does Not Hold Water?

Intel Corporation (NASDAQ:INTC) rallied in the market on reports that Apple Inc. (NASDAQ:AAPL) will turn to its modern wireless modem chips in 2016 for iPhone 7, which is to be sold in emerging markets. Intel has been trying for so long to muscle its way into the mobile industry to no success as mobile companies opt for QUALCOMM, Inc. (NASDAQ:QCOM) chips. During an interview with CNBC, JMP Securities, Alex Gauna, aired his skepticism on Apple hitting a home run with iPhone 7 in emerging markets, Samsung having suffered a beating on the same front amidst stiff competition.

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Samsung tried to capture emerging markets with new products last year but failed miserably a fate that could also befall Apple Inc. (NASDAQ:AAPL) with iPhone 7, considerably denting Intel prospects with the wireless modem chips.

“What has taken them so long?  As we know Intel Corporation (NASDAQ:INTC) has been burning about a billion dollars a quarter trying to muscle its way into the mobile industry with very little success. Could there be an opportunity in emerging markets for a tear to skew from Apple Inc. (NASDAQ:AAPL)? Absolutely not,” said Mr. Gauna

JMP Securities currently has an underperform rating on Intel Corporation (NASDAQ:INTC) with a share price target of $30. On belief that the giant chip company is struggling on the data center business attributed to issues related to a defective component. The company’s data centers prospects have also been affected by cloud vendors waiting on the fringes on new generation servers that are expected to come later in the year.

The sale of smartphones in emerging markets is turning out to be a tall order for Samsung, which is competing with cheaper models from Chinese companies, notably Huawei and Xiaomi. Intel relying on one Distribution Avenue for its products could have massive effects on its earnings. Should a deal fail to materialize or it fails to move as many products as it would have loved.

Apple Inc. (NASDAQ:AAPL) does not have one of the best track records with suppliers; GT Advanced having gone down on failing to reach an agreement for the supply of Saphire Glass.

Skyworks Solutions Inc (NASDAQ:SWKS) Universal Display and Knowles are some of the Apple Inc. (NASDAQ:AAPL) Suppliers that Gauna is betting big on especially on the success of the iPhone product lines, unlike Intel. The analyst expects Knowles Corp (NYSE:KN) to be a big winner with iPhone 6S and iPhone 7 despite experiencing a wave of problems recently.

“What we like and looking forward to the iPhone success and eventually the iPhone 7 and great momentum plays like Skyworks right now leader in the RF’s space. [..] We would expect Skyworks to be one of the big winners because they actually have more content in those original iPhones that use Infineon’s,” said Mr. Gauna.

Universal Display Corporation (NASDAQ:OLED) is another dark horse banking big on the success of Apple Watch at the back of being the chief supplier of OLED screen for the wearable.

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