Apple To Buy 5G Chips From Qualcomm Until 2026 Under a New Deal
Qualcomm on Monday (11 September) announced a new deal with big tech Apple to supply Snapdragon 5G Modem‑RF Systems until 2026. This is a golden opportunity for Qualcomm as Apple is facing increasing challenges in China and will want to reinforce its supply chain elsewhere.
This agreement is worth billions of dollars for Qualcomm at least for the next three years. It mildly indicates that the iPhone maker is not rushing out its own modem. However, Apple moved all the computers to the M3 processing chips of their own design.
Rising Stock Prices Amid the Renewed Partnership
Qualcomm investors had a soaring start to the week as the stock prices were up as much as 9.29% in the pre-market session on Monday. By late morning, the stock had given up some of its gains and was still 3% high, and in the early afternoon, the shares were up 4%.
On the other hand, Apple’s stock price fell 6% in the last week. With the Qualcomm deal, the stock price was up 0.4%. It will be noteworthy to see the jump in Apple’s stock in the midst of its new iPhone launch and China banning the iPhone in the workplace.
Susannah Streeter, head of money and markets at Hargreaves Lansdown said, “At a time when Apple is running into increasing challenges in China, reinforcing its supply chains elsewhere is a priority, and it appears the company is rolling back or at least delaying plans to go at it alone in more areas with its chip production.”
The 2019 Chip Supply Deal
San Diego-based Qualcomm signed a chip supply deal previously in 2019 with Apple, after the settlement of a protracted legal clash between the two companies. This heated legal battle was over the patent which then forced the tech giant to settle outside of the court.
The basis of the suit was Apple bought modem chips from Qualcomm for the iPhones. However, these chips had patented technology and the chipmaker charged Apple for the chips and a separate license fee for the use of patented technology. Apple opposed it and called it ‘double dipping’. Qualcomm accused Apple of blackmailing and refused to sell the chips. Both the companies decided to fight it all the way and it started a multi-billion-dollar trial which on day one unexpectedly ended when both companies reached an out-of-court settlement.
The patent licensing deal Qualcomm signed with Apple in 2019 will remain in place. This deal will expire in 2025 and the companies have the option to extend it for another two years.
Qualcomm said on Monday that its financial projections presume that only a fifth of the iPhones will have its chips by 2026. It is notable that Qualcomm made a similar projection in 2021 about its business with Apple which turned out overly conservative as the iPhone 14 models released last year all had Qualcomm modems.