Qualcomm Extends 5G Modem Supply Deal with Apple Through 2026

Qualcomm extends its partnership with Apple, supplying 5G modems until 2026, diverging from earlier expectations. This collaboration bolsters Qualcomms handset business, vital as Apple explores in-house modems.

Qualcomm has announced a significant extension of its partnership with tech giant Apple, revealing plans to supply 5G modems for Apple's smartphones until 2026. This announcement diverges from prior expectations, as Wall Street analysts and Qualcomm officials had anticipated Apple's shift towards using its internally developed 5G modems by 2024.

This continued collaboration with Apple presents a lucrative opportunity for Qualcomm, given the boost it will provide to their handset business. In the quarter ending June, Qualcomm's handset business raked in an impressive $5.26 billion in sales. Additionally, this move may act as a safeguard against the potential loss of a major customer, as approximately 21% of Qualcomm's fiscal 2022 revenue, estimated at $44.2 billion by UBS, came from Apple.

While Apple had been striving to build its own modems since acquiring Intel's smartphone modem division in 2019, analysts have pointed out the complexity of this endeavor, potentially making it challenging for Apple to fully transition away from Qualcomm's chips.

In addition to modem supply, Qualcomm also generates revenue from Apple through cellular licensing fees, amounting to around $1.9 billion in 2022, according to UBS estimates. This arrangement is part of a six-year agreement that emerged after a legal battle over royalties between the two tech giants in 2019.

Notably, Qualcomm's projection that it will only provide 20% of the modems required for Apple's 2026 smartphone launch suggests an anticipation of a gradual decline in their business relationship. However, Qualcomm has not revised its guidance to reflect these Apple sales.

As Apple prepares to unveil its next-generation iPhones, likely to be named the iPhone 15, it's clear that Qualcomm's modems will continue to play a pivotal role in Apple's product lineup. Apple declined to comment on this development.

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