Apple holds the key to significantly changing Intel's $150 billion business

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Intel CEO Brian Krzanich

The report says Intel now has 1,000 people dedicated to working on this project that would potentially make Intel one of the main modem suppliers for Apple's next iPhones.

Intel's also trying to become the fabrication partner that manufactures the iPhone's system-on-a-chip (SOC), a microchip that combines everything from the CPU and modem chips to memory and graphic circuits.

The potential deal seems to only cover the modem chips and SOC manufacturing, meaning Apple will continue to use its own A9 chips as the main CPU chip.

The report said Apple hasn't officially signed a deal yet, but they could "if Intel continues to hit its project milestones."

The rumored deal could be a significant game changer for Intel, a $150 billion chip giant that famously missed out on the shift to mobile. Last year alone, Intel lost more than $4 billion from its mobile business, prompting its chairman Andy Bryant to say, "This is the price you pay to get back in and we will get back in." A major partnership with Apple will signal Intel's first step into the mobile business.

"If true, this would be a huge deal on two vectors," Patrick Moorhead, president of Moor Insights and Strategy told us. "First, it would be the first time in many generations that Intel supplied the modem of the iPhone as Infineon (now Intel) did in the past. It would also signal the first time Intel would have taken on a high-volume fab customer. Intel has lower volume partners like Altera, but nothing like the volume an Apple SoC and modem would create."

A bigger mobile business could also potentially help Intel offset the losses it's seeing in a shrinking PC market. Historically, Intel has made most of its revenue by selling chips to personal computers, but the PC market's decline has caused Intel's PC business growth to stall as well. Instead, Intel has been finding growth from its data center business, which generated roughly $4.1 billion last quarter alone.

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