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Qualcomm Chips At Core of New Apple iPhone 4S

Those lining up to buy Apple Inc.’s latest iPhone 4S probably don’t know it but some of the key components inside the device are made by San Diego-based Qualcomm Inc.

Actually, Qualcomm has three parts inside the fifth version of Apple’s iPhone, but the two primary pieces are a baseband application processing chip and a modem, according to Jim Mielke, vice president of engineering for ABI, an Oyster Bay, N.Y., research firm.

Mielke’s firm is among a group of companies that dissect or “teardown” smartphones and a host of other electronic gizmos when the products go out for sale. Electronic device manufacturers and designers use the information to understand what competitors are doing, and make necessary modifications to new products.

For the Apple iPhones, the teardown was intensely watched because their phones are the hottest selling ones on the planet and set a standard that many others seek to match, Mielke said.

The most recent iPhone contains Qualcomm chipsets that are capable of working on the world’s two main wireless technologies, and all of the world’s telecom carrier networks, Mielke said.

“This is a win for Qualcomm,” he said. “With the new phones, they can be used on any of the networks both here and abroad.”

More Versatility

The previous version of the iPhone, called the 4C, contained a Qualcomm processor but the phone made for Verizon could only operate on networks using CDMA technology, or code division multiple access. The new phone works on the other wireless system called global system for mobile positioning, or GSM.

Just how much this affects Qualcomm sales is uncertain. A spokesman for the company declined any comment, and Apple isn’t talking about the relationship either.

Several technology analysts forecast more than 100 million in iPhone sales in 2012. Apple CEO Tim Cook, who replaced the late Steve Jobs earlier this year, said that 4 million iPhone 4S units were sold in the first three days they were available, a record. When Apple rolled out the fourth version of the iPhone last year the device sold about 1.7 million units in three days, the company said.

Chris Caso, an analyst with Susquehanna Financial Group, forecast in a recent report that Apple would sell 26 million to 28 million iPhone 4S units in the fourth quarter, which would offset a decline in the older iPhone models in the third quarter. He expects “a very strong ramp for iPhone 4S in the fourth quarter, which has positive implications for QCOM and BRCM,” referring to the stock ticker for Qualcomm and Broadcom Corp., an Orange County-based maker of semiconductors that also has a component inside the iPhone 4S.

One of the more attractive features of the latest iPhone is a unique application within its new operating system called Siri that allows users to talk into the phone and ask questions. “It turns the phone into your personal assistant with a personality,” Mielke said. “It’s pretty amazing, almost like talking to a real person.”

Remarkable Processing Power

The real story with the iPhone 4S is the remarkable processing power the device has. The computing power in the phone and other smaller wireless devices such as tablets are becoming just as fast as those for larger devices such as personal computers and video gaming boxes, Mielke said.

That trend may present problems for the makers of chips contained in personal computers and laptops such as Intel Corp. because while the sale of the smaller devices is definitely increasing, sales of the larger computers have declined, he said.

Analysts covering Qualcomm have been generally optimistic about the company’s growth prospects this year and next. According to Yahoo Finance, the consensus estimate for the company’s fourth quarter revenue that will be announced Nov. 2 is $4 billion, up from $2.95 billion in the prior year’s fourth quarter. For its 2011 fiscal year that ended Sept. 30 the consensus on revenue is $14.8 billion, compared with the actual 2010 fiscal year revenue of $10.99 billion.

In terms of earnings per share, the average estimate by the panel of 33 analysts for the fourth quarter is 78 cents and for the full year, $3.19.

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