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Amid challenges in China, Apple solidified its global supply chain by sealing a deal with Qualcomm, ensuring a 5G chip supply until 2026. This multi-billion-dollar partnership underscores a prolonged collaboration despite Apple's shift to self-designed processing chips.
The extension of the agreement surpasses expectations, as it secures a long-term partnership between the two companies worth billions of dollars. This collaboration also suggests that Apple is not rushing to develop its modem despite transitioning its computers to self-designed processing chips.
Following the official announcement, Qualcomm's shares increased 4% in early afternoon trade, further solidifying its position as a leading designer of modem chips that facilitate connectivity between smartphones and mobile data networks. Conversely, Apple's shares saw a more modest rise of 0.5%.
2019, Qualcomm and Apple signed a chip supply deal after resolving a lengthy legal dispute. As the existing supply agreement is scheduled to conclude this year, it is anticipated that the upcoming iPhones set to be announced on Tuesday will be the last to debut under that specific arrangement.
The exact financial details of the deal were not disclosed by either party, with Qualcomm only stating that the terms are "similar" to the previous agreement. Market analysts at UBS estimate that Qualcomm sold approximately $7.26 billion worth of chips to Apple in 2022.
Furthermore, Qualcomm emphasized that the patent licensing deal it signed with Apple in 2019 would remain in effect. This agreement expires in 2025, but the two companies can extend it for two more years.
While Apple continued developing its modem technology and acquired Intel's modem unit in 2019 for a staggering $1 billion, the timeline for fully implementing its chips remains undisclosed.
Qualcomm shared that its future financial projections assume that only a fifth of Apple's iPhones will utilize its chips by 2026.
Photo: James Yarema/Unsplash
