In a significant development in the tech industry, Apple and Qualcomm Incorporated announced a new chip supply agreement on Monday, solidifying their partnership for the foreseeable future. The agreement entails Qualcomm providing its cutting-edge Snapdragon 5G Modem-RF Systems to power Apple’s iPhones, scheduled for launch between 2024 and 2026.
While the precise financial details of this high-stakes collaboration remain confidential, a Qualcomm spokesperson confirmed the agreement’s existence to Yahoo Finance. This latest move by Apple reinforces the company’s commitment to sourcing critical components from outside suppliers, signaling a departure from its earlier attempts to exert control by producing its own chips.
In a surprising twist, Apple initially seemed poised to develop its own modem chips in-house after acquiring Intel’s modem chip business in 2019. However, the decision to partner with Qualcomm for the Snapdragon 5G Modem-RF Systems underscores Apple’s acknowledgment that its internal technology might not yet be ready for the spotlight. This announcement also marks a departure from Qualcomm CEO Cristiano Amon’s earlier statements, where he anticipated Apple producing its modems for 2024.
Apple’s drive to replace external suppliers with its proprietary technology became evident in 2020 when the company terminated a 15-year partnership with Intel. The rationale behind this move was Apple’s ambition to design Macs with its custom-made chips, and this vision materialized with the release of a series of Macs featuring Apple’s own processors. However, the journey towards self-sufficiency in smartphones, specifically in the supply chain, is more complex, given that iPhones continue to rely on Arm-based chips. Although Apple manufactures these chips in-house, it licenses the fundamental architecture from Arm. Experts estimate that Apple could potentially save billions by gaining complete control over its chip production.
This newly announced agreement between Apple and Qualcomm mirrors their previous collaboration in structure, offering some reassurance to Qualcomm and other Apple suppliers concerned about their future prospects. The Qualcomm spokesperson clarified that this deal has not factored into the company’s current guidance for the year, but there may be adjustments when they release their next financial report.
This announcement comes at a pivotal moment for Apple, as the company prepares to unveil its latest lineup of iPhones, Apple Watches, and other products. Chips play a pivotal role in the company’s pricing strategy, with Wedbush analyst Dan Ives suggesting a modest increase in iPhone prices. He noted that “now is the time to increase iPhone prices modestly.”
Apple and Qualcomm have a storied history of legal disputes, including a protracted battle over licensing terms that finally concluded in 2019 when they agreed to drop litigation. This newly solidified partnership signifies the next step in Apple’s ongoing quest to maximize control over its technology and production.
For Apple’s suppliers, this agreement offers a temporary respite, albeit with an underlying uncertainty as they await Apple’s next strategic move.
Source: Yahoo Finance
