Despite years of development for in-house modem chips, Apple agreed to extend its procurement agreement to source them from Qualcomm by three years, showing how challenging it is even for Apple to decouple from Qualcomm.
According to Qualcomm's press release, the company agreed with Apple to supply Snapdragon 5G Modem‑RF Systems for smartphone launches in 2024, 2025, and 2026. This agreement reinforces Qualcomm's track record of sustained leadership across 5G technologies and products.
According to Bloomberg's estimates, Apple accounted for US$9.78 billion, or 22.29% of Qualcomm's revenue. Qualcomm's revenue of US$9.78 billion constituted 5.18% of Apple's costs. Apple is the largest customer of Qualcomm, while Qualcomm is the seventh-largest supplier for Apple. Bloomberg estimation did not elaborate on which fiscal year the figure belonged to for both companies.
The relationship between Apple and Qualcomm has been uneasy in recent years. Apple sued Qualcomm in 2017, accusing the latter of anti-competitive practices by charging it excessive royalty fees to purchase chips. The duo settled the lawsuit in 2019, but Apple did not stop developing modem chips, with occasional rumors and analyses saying Apple would power its products launched in 2023 with its modem chips.
Qualcomm assumed in 2019 that it would supply only 20% of the modems in iPhones in 2023. However, the fabless chipmaker in 2022 that the vast majority of iPhones launched in 2023 will feature Qualcomm's modem chips.
Although Apple spent US$1 billion to buy Intel's modem business in 2019, beginning its journey to develop in-house modem chips to reduce its reliance on Qualcomm, the extension of the supply deal signified that it is difficult for Apple to challenge Qualcomm's leadership in the 5G technologies.
Under the plan of Apple Silicon, Apple, the world's largest company by market capitalization, is looking to replace chips used in Apple's products with in-house chips and successfully produce processors now powering its Macs since 2020.
Bloomberg Intelligence analysts said in a note that although it would take longer for Apple to break its dependence on Qualcomm, the smartphone maker is not abandoning its effort to take greater control of the supply chain, as it did with Intel processors.
Source: Bloomberg, September 2023
