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

Sep 11 (Reuters) – Qualcomm (QCOM.O) said on Monday that it had signed a deal with Apple (AAPL.O) supply 5G chips until at least 2026, as the iPhone maker faces greater challenges in China and looks to bolster its supply chains elsewhere.

The deal extends a multibillion-dollar relationship with Qualcomm for at least three years beyond what was expected and signals that Apple is not rushing to launch its own modem, despite moving all of its computers to its own processing chips. own design.

Qualcomm shares rose 4% in early afternoon trading. The company is the leading designer of modem chips that connect phones to mobile data networks. Apple shares rose 0.5%.

San Diego, California-based Qualcomm previously signed a chip supply deal with Apple in 2019, after the two companies resolved a protracted legal battle.

That supply deal ends this year, meaning the iPhones Apple is expected to announce Tuesday would be the last phone to debut under that deal.

Under the deal announced Monday, Qualcomm said it will supply Apple with chips for phones coming out each year until 2026. Qualcomm did not disclose the value of the deal, saying only that the terms are “similar” to its previous agreement.

Apple did not immediately respond to a request for comment.

In an August 3 research note, UBS analysts estimated that Qualcomm sold $7.26 billion of chips to Apple in 2022.

Qualcomm also said that a patent licensing agreement it signed with Apple in 2019 remains in effect. That agreement expires in 2025, but the companies have the option to extend it for two years.

“At a time when Apple faces increasing challenges in China, shoring up its supply chains elsewhere is a priority, and it appears the company is backing off or at least delaying its plans to go it alone in more areas with its own chip production.” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Apple is working on its own modem technology and spent $1 billion to buy Intel (INTC.O) modem unit in 2019. Apple has not said how quickly it plans to increase use of its own chips.

Qualcomm said Monday that its financial projections will assume that only a fifth of Apple’s iPhones will use its chips by 2026.

However, Qualcomm made a similar projection about its deal with Apple in 2021 that turned out to be too conservative, as the iPhone 14 models released last year used Qualcomm modems.

And last year, Qualcomm CFO Akash Palkhiwala updated his predictions for the 2023 iPhones launching this week, saying he expected the “vast majority” of them to include Qualcomm modems.

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