Apple has been dedicatedly working for years to create its in-house 5G modem, aiming to minimize reliance on Qualcomm and reduce the substantial fees associated with utilizing the latter’s technology. The anticipated iPhone SE 4, set to launch next year, could mark the debut of Apple’s custom-designed baseband chip. Despite this significant step forward, Apple’s existing licensing arrangement with Qualcomm is poised to continue until March 2027, yet preparations to establish a self-sufficient supply chain for this key component are already underway.
Qualcomm and Apple: A Delicate Business Relationship
Even as Apple prepares to transition away from Qualcomm, industry analysts caution that Qualcomm holds a critical advantage in this relationship. An analyst suggested that Qualcomm could severely impact Apple by ceasing modem shipments, a move that, while detrimental to Apple, may not provide any direct financial benefit to Qualcomm. Such a scenario would compel Apple to urgently seek an alternative supplier, which could complicate its plans.
Exorbitant Payments: Apple’s Financial Commitment to Qualcomm
According to leading technology analyst Patrick Moorhead, Apple likely dispenses a significant sum to Qualcomm for their 5G modem technologies used in various devices. Currently, Apple could face stock market repercussions if Qualcomm were to halt supplies abruptly. However, Moorhead observes that Qualcomm might see an opportunity to maximize revenue in light of this likely dependency, rather than retaliate against Apple.
Potential Earnings from 5G Modems
Qualcomm’s financial gains from selling 5G modems to Apple are noteworthy. A recent ‘Bill of Materials’ analysis of the iPhone 16 Pro Max suggests that, based on Apple’s projected shipment target of 90 million units for 2024, Qualcomm could generate approximately $2.52 billion from modem sales alone, with each unit estimated to cost around $28. This figure exclusively pertains to the upcoming iPhone 16 series, and Qualcomm’s earnings could be even higher when factoring in sales from earlier iPhone models and the latest iPads sold worldwide.
Apple’s Aspirations for In-House Development
Apple’s transition to utilizing its own 5G modems is set to commence with the iPhone SE 4. The company’s long-term strategy aims to outpace Qualcomm’s offerings while also introducing advanced features like mmWave support in future models, including the iPhone 18 Pro and iPhone 18 Pro Max. Additionally, Apple is investigating the possibility of integrating cellular connectivity into its Macs, potentially debuting this technology in the forthcoming Apple Vision Pro model.
Qualcomm $QCOM has already zeroed out Apple revenue for 2027 and beyond. Keep in mind, Apple has been trying to do this since July 2019 when it bought Intel’s assets. Technically they have been trying to do it for a decade if you count Intel 5G.
My belief: there will be Apple… https://t.co/4wap26PHaN
— Patrick Moorhead (@PatrickMoorhead) December 7, 2024
For further details on this evolving narrative regarding Qualcomm and Apple, you can follow Patrick Moorhead’s insights on Twitter.
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