Qualcomm Extends Deal with Apple to Supply 5G Chips Until 2026
San Diego, California-based Qualcomm announced on Monday that it has signed a deal with Apple to supply 5G chips until at least 2026. This extended agreement, worth billions of dollars, reaffirms the strong partnership between the two tech giants. The deal comes at a crucial time for Apple, as it faces challenges in the Chinese market and seeks to strengthen its supply chains globally.
Under the terms of the deal, Qualcomm will provide Apple with chips for its upcoming iPhone models until 2026. This indicates that Apple is not rushing to develop its own modem, despite its recent shift to using in-house designed processing chips in its computers.
Shares of Qualcomm rose by 4% following the announcement, while Apple’s shares also saw a modest increase of 0.5%.
This agreement builds upon a previous chip supply deal signed by Qualcomm and Apple in 2019, after resolving a lengthy legal battle. The previous agreement, set to expire this year, resulted in the last iPhone models releasing under that deal.
While the exact value of the new deal remains undisclosed, Qualcomm stated that the terms are similar to the previous agreement. Additionally, a patent licensing deal between the two companies, which was signed in 2019 and set to expire in 2025, will remain in place with an option for a two-year extension.
“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 own chip production,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Apple has been actively working on developing its own modem technology and acquired Intel’s modem unit for $1 billion in 2019. However, Apple has not disclosed its timeline for fully utilizing its own chips.
Qualcomm expects that only a fifth of Apple’s iPhones will be equipped with its chips by 2026, according to its financial projections. However, the company’s conservative projection for its business with Apple in 2021 was surpassed, with all iPhone 14 models released last year using Qualcomm modems.
The demand for 5G technology is on the rise, and Qualcomm’s position as a leading designer of modem chips puts them in a favorable position in the market. The extended partnership with Apple will further solidify Qualcomm’s market presence and revenue growth.
Reporting by Stephen Nellis in San Francisco; Additional reporting by Yuvraj Malik in Bengaluru; Editing by Miral Fahmy, David Holmes, and Richard Chang.