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Apple (AAPL) Unlikely to Use Intel Chips in 2020 iPhones

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Apple (AAPL - Free Report) has reportedly informed Intel (INTC) that it will not be using ‘the chip-makers 5G modems in 2020 iPhone product lineup, per Calcalist. Additionally, per Bloomberg, Apple is interested in a Taiwanese company, MediaTek, for 5G modem chips.

Notably, Apple is extensively preparing to launch 5G in its mobile products, which will give it an edge in technology, thereby driving its top line.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM) | Apple Inc. Quote

Also, earlier this year, there were reports that Apple will not use Intel’s chips in Mac products in 2020, replacing them with in-house chips.

This came as a blow to Intel, which terminated the development of its 5G modems (Sunny Peak), as Apple was anticipated to be its main buyer. However, the company is now focusing on developing a better 5G modem in a bid to feature in Apple’s 2022 lineup.

Apple’s Diversifying Supplier Base

In Ming-Chi Kuo’s research report this February, a supply chain analyst had stated that Apple will depend on Intel’s modems for current year iPhones in its attempt to be less reliant on Qualcomm (QCOM - Free Report) as its primary supplier of chips.

However, the recent development come as a blow to Intel as Apple is likely to choose MediaTek in its effort to rely less on both Intel and Qualcomm.

This also applies for organic light-emitting diode (OLED) screens as Apple lowered its dependence on Samsung by investing more than $2 billion last year in South Korea’s LG Display Co.

Apparently, the company was also in talks with China’s BOE Technology Group Co. to supply OLED displays for iPhones.

Apple Rides on Flourishing Portfolio

Apple’s iPhone is the single biggest revenue driver but the company is now looking beyond it. In this connection, the company’s efforts to diversify its portfolio have paid off as its Services segment is the new cash cow for the company.

Services, which include revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, licensing and other services have been a key catalyst. The company is on track to double Services revenues of $24 billion in fiscal 2016 by 2020. The segment is expected to grow strongly driven by increasing adoption of Apple Music & Apple Pay.

Apple is pushing into original content as it reportedly outspent Facebook (FB - Free Report) and Alphabet (GOOGL - Free Report) division YouTube’s investment to acquire original programs.

In addition to partnering with Oprah Winfrey to create original programs, the company also teamed up with Emmy award-winning television producer Sesame Workshop to create children's programming.

Apple’s latest additions indicate its search for more diversified revenue streams, thereby anticipating top-line growth.

Currently, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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