Is Intel Apple’s Newest Buddy?

Apple (NASDAQ:AAPL) is trying to reduce its processor supply dependence on Samsung and is in talks with Intel (NASDAQ:INTC) to take over, RBC Capital analyst Doug Freedman said. However, Freedman added that the start of any relationship between Apple and Intel will be accompanied by significant changes for both companies, Fortune said.

Why Would Apple Need to Switch Suppliers?

Speculation is already rife about the Apple-Samsung supply relationship because of the two companies’ fierce rivalry in the smartphone and tablet market. According to the analyst, another potential problem is that Apple’s demand for mobile processors is set to surpass Samsung’s capabilities by next year. Freedman’s colleague Amit Daryanani had earlier written in a research note of his own that Intel was a possible alternative for Apple, along with Taiwan Semiconductor Manufacturing Company (NYSE:TSM) and GlobalFoundries.

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How May Apple and Intel Be Affected?

Of the three, Intel had “the upper-hand due to the limitations of capacity at alternative sources” to land Apple’s $2 billion chip-making contract, Freedman said.

For a potential deal with Apple to go through, Intel will have to build chips based on the ARM (NASDAQ:ARMH) structure for the iPhone and iPod touch. So far, Intel has only built chips based on its own x86 architecture. Apple, in turn, may have to switch the iPad’s processor to x86.

How Does the News Affect the Stocks?

The news will come as a positive one for Intel, considering the estimated size of the contract and the added connection with Apple’s bestselling products. Apple shareholders will not be impressed by the talk of possible uncertainty vis-à-vis a critical product component, but a reduced dependence on Samsung is not really bad news.

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