Analyst: Don't Look for Apple's Custom Baseband Chips this Year

JP Morgan analyst Rod Hall isn't buying into reports that Apple is ready to dump Qualcomm and use its own custom designed baseband chips in the next iPhone. He thinks Apple is working on its own chips, but that they won't be ready until some time in 2015.

Apple may be designing its own baseband chips for future iPhonesApple may be designing its own baseband chips for future iPhones

The baseband chip handles the wireless communication between smartphones and cell service providers. In essence, it's like a little radio packed inside your iPhone that knows exactly with frequencies cell companies use for voice and wireless data communication.

Rumors claim Apple has been working on its own custom baseband chip for the iPhone, and that it could show up in this fall's update. Mr. Hall, however, says that's not the case because the chip development process is "notoriously difficult," according to Wall St. Cheat Sheet.

Assuming Apple is designing its own baseband chips, that ultimately spells bad news for Qualcomm. Apple will reportedly use Samsung for chip manufacturing, which would cut Qualcomm out completely, which would have a big impact on the company's bottom line.

Taiwan Semiconductor Manufacturing Company would see a big hit, too, since it handles Qualcomm's chip manufacturing process.

Bringing baseband chips inside Apple would give the iPhone and iPad maker more control over the design process, which would lead to better overall performance and more efficient power usage.

Apple isn't saying whether or not it is working on its own baseband chips, but the company has a proven track record of coming up with its own designs. The iPhone, iPod touch and iPad currently use Apple-designed A-series processors, and it isn't any secret that the company is working on improved processors, too.

For Apple, developing its own baseband chips would give the company even more control over the components in future iPhone models. For the chip makers it relies on today, however, that could be a big financial blow.