Top Apple analyst says iPhone 13 will likely support calls and messages via satellites directly

Published Mon, Aug 30 20217:39 AM EDTUpdated Mon, Aug 30 20215:28 PM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

(This story is for CNBC PRO subscribers only.) Apple is "optimistic about the trend of satellite communications" and "will likely" include the ability to connect to extraterrestrial networks in its coming iPhone 13, TFI Securities analyst Ming-Chi Kuo predicted in a note to investors on Sunday. "If Apple enables the relevant software functions, iPhone 13 users can call and send messages via satellite when not within 4G/5G coverage," Kuo wrote. Kuo is considered to be one of the top analysts on Apple , reliably describing unreleased products and features. He focuses on Apple's supply chain in Asia. The iPhone 13 is expected to be released in September. The company "has been setting up a specific team in charge of the research and development of related technologies and applications for some time," Kuo noted. He believes that the satellite company "most likely to cooperate with Apple" on the new feature is Globalstar , which has an existing satellite phone network of 24 satellites in low Earth orbit. Shares of Globalstar jumped 64% in trading on Monday to close at $2.35. The company had a value of $2.6 billion before the market's open, according to FactSet. Globalstar did not immediately respond to CNBC's request for comment on the research. Satellite communications — which has several existing networks that support specialized, purpose-built phones — is undergoing a new era of investment. Companies including Elon Musk's SpaceX, Amazon , Canada's Telesat, and the British firm OneWeb are each building new low Earth orbit (LEO) networks, capable of supplying high-speed internet to consumers, companies and more. Kuo said the mobile network industry "is facing two revolutions" with LEO satellites and 5G. "Suppose Apple can leverage these two new network technologies. In that case, it can enhance the user experience of existing hardware products and provide innovative user experiences that can be integrated with new products (head-mounted display (HMD), Apple Car, and IoT accessories) in the future," Kuo said. A customized chip Apple adding satellite connection support to the iPhone 13 would mean users could call or text even outside of areas without 4G or 5G mobile network coverage on the ground. Kuo's research shows that the iPhone 13 is using a customized Qualcomm chip, called X60, to add the satellite support. He noted that other smartphone companies "will have to wait until 2022" to add satellite support, as other firms will need Qualcomm's X65 chip. The connection to Globalstar comes through Qualcomm existing relationship with the satellite company, Kuo noted. Qualcomm currently "expects to support Globalstar's" network frequency "in future X65 baseband chips." The relationship is why Kuo predicted Globalstar is Apple's "most likely partner" for iPhone 13 satellite support. "There are many potential scenarios for Apple's business model cooperation with Globalstar. The simplest scenario is that if the user's operator has already teamed with Globalstar, the user can directly use Globalstar's satellite communication service on the iPhone 13 through the operator's service," Kuo said. Iridium connection William Blair analyst Louie DiPalma highlighted Kuo's report in a research note on Sunday, and added that he believes Apple may also "embed Iridium connectivity in iPhones down the road." The satellite company in recent years completed deployment of the 66 satellites of its Iridium NEXT network in LEO. "Iridium has discreetly dropped hints at four different investor events that it is pursuing embedding its LEO satellite connectivity into smartphones," DiPalma wrote. Iridium shares rose 15% in trading on Monday to close at $46.88. William Blair has an outperform rating on the stock. Influenced by SpaceX's Starlink Multiple companies are investing billions in new LEO satellite broadband networks, led by SpaceX's Starlink. Kuo referenced Starlink in his note, calling Musk's network "worthy of investors' attention" and saying the LEO communications "is one of the critical trends in the tech industry in 2022." Starlink is SpaceX's capital-intensive project to build an interconnected internet network with thousands of satellites, known in the space industry as a constellation, designed to deliver high-speed internet to consumers anywhere on the planet. SpaceX first rolled out the service with a beta program for select consumers for $99 a month, and in the past year has begun looking to test the network for aviation service inflight and expand the service to large moving vehicles, like ships and trucks . While Starlink service is still in beta, Musk's company recently said that the network has 100,000 users in 14 countries so far , with over half a million orders or refundable deposits placed by potential customers. "The service and related component shipments of LEO satellite will grow significantly in 2022," Kuo said, adding that existing LEO satellite companies "will be the first beneficiaries of this trend." – CNBC's Michael Bloom contributed to this report.

CEO Tim Cook speaks at an Apple event at the company's headquarters in Cupertino, California, September 10, 2019.

Stephen Lam | Reuters

(This story is for CNBC PRO subscribers only.)

Apple is "optimistic about the trend of satellite communications" and "will likely" include the ability to connect to extraterrestrial networks in its coming iPhone 13, TFI Securities analyst Ming-Chi Kuo predicted in a note to investors on Sunday.