Apple Inc.'s Brilliant Cellular Modem Strategy

Apple's (NASDAQ: AAPL) iPhone 7 series of smartphones, as well as its new iPhone 8, 8 Plus, and iPhone X smartphones, all use cellular modems sourced from either market leader Qualcomm (NASDAQ: QCOM) or fast follower Intel (NASDAQ: INTC). It's well known that Apple's decision to source modem chips from both companies has forced the company to be about a generation behind in cellular capabilities, since Qualcomm's current best standalone modems are at least a generation ahead of Intel's in terms of advertised feature sets.

Apple's decision to multi-source modems has drawn criticism. For example, Ryan Shrout, head of Shrout Research and the owner of tech review site PCPerspective, said in a recent opinion piece that Apple's new iPhone 8 and iPhone X suffer "a performance deficit that has real-world impact in comparison to many flagship-class devices that use Alphabet Inc.'s (NASDAQ: GOOG) (NASDAQ: GOOGL) Android operating system."

That's probably true, though I doubt that more than a small fraction of iPhone 8 or iPhone X buyers will care. And from a long-term supply-chain management perspective, Apple is absolutely doing the right thing.

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Source: Fool.com