Apple not as far along on 5G chip, renews Qualcomm deal

Qualcomm shares surged 4 percent after deal announcement.
Sejal Sharma
Qualcomm announces agreement with Apple for chip supply
Qualcomm announces agreement with Apple for chip supply


In a major win for Qualcomm, the wireless tech company has struck a new chips agreement with Apple. Their previous deal to provide 5G modem chips was inked in 2019 and was set to conclude this year. The new deal signed Monday means it will continue to be a supplier to the iPhone maker through 2026.

The deal also means that Qualcomm will maintain its patent licensing agreement with Apple, which would mean millions in royalty revenue for the chipmaker. Qualcomm shares shot up by 4 percent soon after the deal's announcement.

A tale of frenemies

Apple has been buying Qualcomm’s modem chips for years, but the two companies had had a tottering relationship since 2017, when both firms filed a handful of lawsuits. Apple contended that Qualcomm’s prices and the licensing fees were staggering and that the company was abusing its position as one of the key suppliers of cellular technology.

Qualcomm’s point of contention was that Apple was not releasing payments that were part of a royalty agreement between the two. The following year, amid litigation, in 2019, it was reported that Apple was working on its iPhone chips. It was assumed that Apple would be out with its modem chip by 2024, but the new deal indicates otherwise. 

By 2019, both the firms reached a royalty and patent dispute settlement, the amount of which was not disclosed. Qualcomm announced in its press release Monday that the same global patent license agreement remains unchanged. Qualcomm will continue to collect royalties from Apple under a six-year term, with a two-year option to extend.

No Apple chips anytime soon?

Qualcomm also announced that for the iPhone launch in 2026, it will provide a 20 percent share of chipset supply.

Although there’s been no official word from Apple, the company won’t be out with its modem chip anytime soon. The fact that it has to continue its partnership with Qualcomm shows how tough it is to produce these chips. 

Until March this year, Qualcomm was also unsure whether their partnership would continue. Qualcomm CEO Cristiano Amon had stated in March that the company is making no plans to provide modems for Apple in 2024, but he added that the decision is up to the tech giant. 

About 21 percent of Qualcomm’s fiscal 2022 revenue of $44.2 billion came from Apple, according to a UBS estimate reported by CNBC. Also, Qualcomm made about $1.9 billion in revenue in 2022 through its licensing fees.

In all likelihood, Apple will announce the iPhone 15 today at its event. The iPhone model will have Qualcomm’s 5G modems in them.

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