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Apple has finalized an agreement with Qualcomm to buy 5G modem semiconductors from the chipmaker for three more years, marking an extension of a deal set to end this year. The move suggests that Apple’s plans to build its 5G modems require more time. Shares of Qualcomm rose 2.7% on the news.
Qualcomm, Apple’s key supplier, said on Monday it will supply the technology giant with 5G modems through 2026, Bloomberg reported. The move marks an extension of a previously agreed deal in which Qualcomm initially agreed to supply Apple with an internally developed 5G system starting in 2024.
Now, the two companies agreed to have Apple receive Qualcomm’s semiconductors for three additional years, suggesting that the iPhone maker’s endeavors to build the chips in-house may take longer than anticipated. Shares of Apple fell slightly at the market open, while Qualcomm’s stock surged nearly 2.7%.
The pact between Apple and Qualcomm was initially supposed to end this year, and the latest iPhone model – set to be unveiled on September 12 – was expected to be one of the last to use the company’s modem chip. But now, the deal’s extension means that Qualcomm will handle “smartphone launches in 2024, 2025 and 2026.”
However, the chip manufacturer expects to supply just 20% of the modems needed for Apple’s 2026 smartphone rollout, indicating that it may expect the Apple business to decline eventually. Nevertheless, the extension is expected to significantly boost Qualcomm’s handset business, which generated $5.26 billion in sales in the most recent quarter.
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Meanwhile, Apple’s decision to extend its partnership with Qualcomm likely further delays its plans to develop its 5G modems and move away from third-party providers.
The tech behemoth acquired Intel’s smartphone modem unit in 2019 to start building modems in-house. However, analysts believe this will be challenging for Apple due to the complexity of developing 5G modem systems.
The company staged an impressive stock market performance in 2023 following a challenging 2022, becoming the first-ever business with a $3 trillion valuation earlier this year. Like many of its peers, Apple has invested heavily in artificial intelligence (AI) technology to develop its AI models capable of competing with those built by Microsoft, OpenAI, and Alphabet.
Do you think Apple will eventually ramp up efforts to develop and launch its 5G modem semiconductors? Let us know in the comments below.