Qualcomm to supply Apple with 5G chips until 2026 under new deal

On September 11, Qualcomm announced that it had entered into an agreement with Apple to supply 5G chips until at least 2026. This extension of their partnership, which was anticipated to end this year, is significant and highlights Apple’s continued reliance on Qualcomm’s chips.

Despite Apple’s shift to using its own design for processing chips in its computers, the deal suggests that Apple is not rushing to develop its own modems. Qualcomm’s shares saw a 4% increase, while Apple’s shares rose by 0.5% in response to the news.

The previous chip supply deal between Qualcomm and Apple was established in 2019, following the resolution of a lengthy legal dispute between the two companies. This earlier agreement concludes this year, meaning that the iPhones expected to be announced on Tuesday will be the last to fall under that arrangement. However, under the new agreement, Qualcomm will continue to supply Apple with chips for upcoming phones until 2026, although the exact financial terms of the deal have not been disclosed.

Additionally, Qualcomm noted that its patent licensing deal with Apple, signed in 2019, remains in effect and is set to expire in 2025, with an option for a two-year extension.

Apple has been working on developing its own modem technology and acquired Intel’s modem unit in 2019 for $1 billion. While Apple has not specified the timeline for implementing its own chips, Qualcomm’s announcement suggests that Apple’s transition to full autonomy in chip production may not be as immediate as previously thought. Qualcomm’s financial projections anticipate that only a fifth of Apple’s iPhones will use its chips by 2026, but past projections have proven conservative, as Qualcomm modems were used in all iPhone 14 models released the previous year. Furthermore, Qualcomm’s CFO, Akash Palkhiwala, has expressed expectations that the “vast majority” of the 2023 iPhones, set to be released soon, will incorporate Qualcomm modems.