Qualcomm's shares fell 3 percent on Monday after two brokerages said Apple might drop the chipmaker in favor of Intel as the supplier for modem chips in its next generation of iPhones.
Qualcomm has been a supplier of components to Apple for years but the relationship took a bad turn last year when Apple accused Qualcomm of overcharging for chips and refusing to pay some US$1 billion in promised rebates.
In a detailed note citing extensive channel checks with chip suppliers, brokerage Nomura Instinet said it anticipated that Apple would drop Qualcomm in favor of a handful of other suppliers, as it seeks to reduce materials costs for iPhones.
Nomura said it believed Apple would source all of its thin modems — so far about half supplied by Qualcomm — from Intel.
"There is speculation that Apple might drop Qualcomm altogether for its next generation phones and I think that's part of the reason the stock is down today," said Angelo Zino, an analyst at CFRA Research.
Apple will save more than US$100 million in the next iPhone cycle by moving to cheaper Intel modem chips, Nomura analyst Romit Shah said.
Broadcom, which is trying to acquire Qualcomm, will likely lose some US$400 million worth of sales of Apple parts in the second half of the year to Qorvo, Shah added.
The reports came as Broadcom on Monday sweetened its bid to buy Qualcomm to more than US$121 billion from an earlier US$103 billion.
Qualcomm was hit with a US$1.23 billion fine by European Union antitrust regulators last month for paying Apple to use only its chips, blocking out rivals such as Intel.
Intel began supplying modem chips to Apple from the iPhone 7 onwards.
Reuters reported in October that Apple had designed iPhones and iPads that would drop chips supplied by Qualcomm.
Analysts at KGI Securities said Intel's modem chips were less expensive than Qualcomm chips and also met Apple's standards, according to Apple news website 9to5Mac.
Sector analysts have said in the past that Intel may not be as well prepared for 5G networking as Qualcomm, and that iPhones with Qualcomm chips have performed better than models running on Intel chips.
KGI Securities did not rule out a return by Qualcomm to the supply chain, perhaps in the form of concessions in the patent lawsuit settlement.
"Using Intel modems across all iPhone SKUs (stock keeping units) also provides Apple with leverage against Qualcomm during the ongoing licensing dispute between the two companies," Nomura's Shah said.
Intel shares were up 1.4 percent at US$46.81 on Monday morning.
Apple and Intel declined to comment. Qualcomm did not immediately respond to a request for comment.
(Reporting by Supantha Mukherjee and Laharee Chatterjee in Bengaluru; Editing by Patrick Graham and Sai Sachin Ravikumar)