German media claims an executive from Intel Germany confirmed Apple has plans to use Intel's Atom processor in a future iPhone.
The report, from our sister site ZDNet.de, is in German. I don't speak German. Google's translation service says "As part of an Intel-Events for the 40th Birthday semiconductor company BMW in Munich, Germany-World's managing director Hannes Schwaderer today confirms what has long been a rumor on the Internet kursierte: namely, that there is an iPhone with Intel's new nuclear-chip type." Atom, in the German version, is spelled the same way as the English word, so I think it's safe to assume that "nuclear-chip type" means Intel's Atom processor. I sent an e-mail to the author of the report hoping to get an official English translation.
Rumors about Apple deciding to throw all of its eggs into Intel's chip-making basket have been persistent ever since Intel started talking about its Silverthorne processor, which is now known as Atom. The problem is that the current generation of Atom is not quite right for smartphones like the iPhone: it gives off too much heat to be practical in a device the size of the iPhone.
The report says the Atom-based iPhone would be larger, and uses the reference design for a mobile Internet device that Intel created for its Fall Intel Developer Forum. That design was a mockup of what MIDs using the next-generation of Atom, code-named Moorestown, might resemble, rather than an actual product blueprint. A switch to Intel's chips is certainly possible for an iPhone released around the 2009-2010 timeframe expected for Moorestown, and it's also possible that Apple has an Atom-based tablet-like device in the works, but it's far from clear.