Is Apple Inc. About to Cut Qualcomm Out?

Apple has made a lot of progress with its custom A-chip designs over the past couple of years. Now the Mac maker may be looking to broaden its chip expertise. A new report says that Apple is preparing to start research and development on baseband processors, which would likely be for its 2015 iPhone models. Baseband processors are what manage radio functions such as cellular connectivity, which make them one of the most important components in any modern smartphone.

As the current exclusive baseband supplier to Apple, Qualcomm (Nasdaq: QCOM) could potentially lose out if the rumors prove true. Apple contributes a hefty amount of revenue, although most of that is licensing related to cellular technology. However, developing cellular baseband technology is a monumental task, and Qualcomm's direct competitors have not been able to catch up after years of development and billions of dollars invested.

In this video from Tuesday's Tech Teardown, host Erin Kennedy and Motley Fool tech and telecom bureau chief Evan Niu discuss Apple's latest rumor.

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Erin Kennedy owns shares of Apple. Evan Niu, CFA owns shares of Apple and Qualcomm. Evan Niu, CFA has the following options: long January 2015 $460 calls on Apple and short January 2015 $480 calls on Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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