Apple’s ambitious effort to design its own modem semiconductors has hit a roadblock, leading to an extension of its agreement with Qualcomm for three more years. This development indicates that Apple’s in-house chip design project is taking longer than expected, and the company will continue to rely on Qualcomm’s modem chips for upcoming smartphone launches until 2026. Although Qualcomm shares surged on the news, this setback raises questions about Apple’s ability to successfully build its own modem component.
Qualcomm’s Ongoing Dominance in Apple’s Supply Chain
The new agreement between Apple and Qualcomm comes as a relief for the latter, as Apple is its largest customer, accounting for nearly a quarter of revenue. This continued partnership reinforces Qualcomm’s claim to having the best smartphone modem and validates its sustained leadership across 5G technologies and products. The undisclosed financial terms of the deal are expected to be similar to the previous arrangement signed in 2019.
Apple’s Modem Component Challenge
For Apple, the extension of the agreement suggests that building a modem component has been more challenging than anticipated. The company’s efforts in creating its own modem began in 2018 and were further bolstered by the acquisition of Intel Corp.’s smartphone chip business in 2019. Initially, some analysts expected Apple’s modem to be ready for the 2023 iPhone, but Qualcomm dispelled those speculations last year.
To develop a successful modem component, Apple faces the daunting task of creating a chip that can seamlessly connect to various global cellular networks while offering performance equal to or better than Qualcomm’s modem. Apple has encountered difficulties related to battery life and bureaucratic challenges involved in certifying the modem with authorities.
While Apple’s modem component project has faced setbacks, the company’s in-house chip push, known as Apple Silicon, has seen success in other areas. Over the past three years, Apple replaced Intel processors in its Macs without significant issues. The battery life and performance gains of the new Macs have been a selling point for Apple. Additionally, Apple has been endeavoring to replace other semiconductors within the iPhone, including a key Broadcom part.
To accelerate its chip development efforts, Apple has expanded its chip talent pool by recruiting experts from both Qualcomm and Broadcom. Teams are collaborating on wireless chip development in Cupertino, San Diego, and Germany.
The new agreement between Apple and Qualcomm extends until 2026, but Apple may still introduce its own modem component before then. Qualcomm expects to hold a 20 percent share of the business when the 2026 iPhone launches, indicating that Apple aims to gradually roll out its in-house modem. However, this projection echoes the language used in the original agreement, and it remains uncertain whether Apple will be able to meet its self-imposed deadline.
The extension of Apple’s agreement with Qualcomm reveals the challenges the company has faced in developing its own modem component. As the release of the iPhone 15 approaches, Apple is relying on the updated Qualcomm modem chip to ensure its devices can connect to speedier 5G networks. While Apple’s success with Apple Silicon demonstrates its capabilities in chip design, the delays in creating its own modem raise concerns about the company’s ability to deliver on its ambitious goals. Apple’s continued collaboration with Qualcomm demonstrates the latter’s dominance in Apple’s supply chain and its position as a leader in the field of smartphone modems.
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