Apple turning to Intel for future iPhone chips, analyst reaffirms

Analyst Jeff Pu reports Intel has a ‘‘solid external customers pipeline’’ for its 14A (1.4nm-class) process, naming Apple, AMD and Nvidia as prospects and reiterating expectations that Intel could win orders to manufacture Apple’s non‑Pro iPhone SoCs starting in 2028. Ming‑Chi Kuo separately suggests Intel may begin shipping Apple’s lowest‑end M series processor (likely a base M7) as early as 2027; Apple would continue designing its chips but add Intel as a foundry alongside TSMC, potentially creating a new manufacturing revenue stream for Intel and altering competitive dynamics among foundries.

Analysis

Market structure: Apple adding Intel as a foundry partner materially weakens TSMC’s de facto monopoly and creates a multi-sourced supply market. If Intel secures non‑Pro iPhone (~100–150M units/year) and low‑end M chips (20–40M units), that implies addressable foundry revenue for Intel on the order of $2–9B/year by 2028 under conservative ASPs ($20–60/chip), shifting pricing power and capacity negotiation leverage away from TSMC.

Competitive dynamics & supply/demand: Intel’s 14A capacity entry should relieve peak TSMC tightness and cap ASP inflation for advanced nodes, benefiting OEMs (AAPL) via better pricing/backup supply but pressuring TSMC share (TSM downside). AMD/NVDA interest implies Intel could also target server GPU/CPU volume, compressing gross margins industry‑wide if Intel undercuts TSMC pricing to win scale.

Risk assessment: Key tail risks are execution (Intel yield/packaging failures), Apple strategic reversal, and geopolitics (export controls or China market restrictions) — these could wipe >50% of expected incremental revenue and deflate INTC rerating. Catalysts include Intel capacity guidance (CFO commentary), Apple supplier filings, and 2027–2028 shipment confirmations; negative catalysts include missed yield targets or ASML tool shortfalls.

Trading implications & cross‑asset: Positive for INTC equity and select equipment vendors (AMAT, KLAC), negative for TSM (TSM) and short‑dated TWD FX exposure. Credit spreads for Intel could tighten on confirmed orders; option IVs on INTC/TSM will spike on near‑term news so structured option entry is preferred over naked exposure.

Key Decisions for Investors

• Establish a 2–3% portfolio long in INTC (equity) phased 50/50 now and into H1 2027; increase to 4% only if Intel confirms >100M chip annual run‑rate for Apple or guides incremental annualized foundry revenue >$2B in an earnings call.
• Initiate a pair trade: long INTC 2% / short TSM 1.5% (equal $ notional) to express share shift risk; trim the short if TSM announces capacity expansion that preserves >70% market share at advanced nodes.
• Buy INTC 24–36 month call spreads (e.g., 2029 LEAP call spread) sized ~1% portfolio to cap cost and capture upside from volume ramps; finance by selling near‑term (3–6 month) calls on INTC after any post‑announcement pop to collect premium.
• Long 1% positions in semiconductor equipment names AMAT and KLAC (or pro‑rata exposure to SOX ETF) because Intel’s 14A ramp requires front‑end/back‑end tool spend; exit if Intel capex guidance falls >25% vs prior plan.
• Protect downside with a 0.5–1% portfolio purchase of TSM 2028 one‑year puts (or buy protective calls on TWD) sized to cover the short exposure; reassess within 90 days of any official Apple/Intel supply‑agreement disclosure.