Sept 11 (Reuters) – Qualcomm (QCOM.O) said on Monday it had struck a deal with Apple (AAPL.O) to supply 5G chips until at least 2026. During this time, iPhone makers face additional challenges in China, and the outlook is bleak. To strengthen the supply chain elsewhere.
The deal extends its multibillion-dollar relationship with Qualcomm beyond expectations by at least three years, prompting Apple to rush its own modems even as it migrates all its computers to proprietary processing chips. This indicates that there is no intention to abolish it.
Qualcomm shares rose 4% in early afternoon trading. The company is a leading designer of modem chips that connect phones to mobile data networks. Apple shares rose 0.5%.
San Diego, Calif.-based Qualcomm signed a chip supply deal with Apple in 2019 after the two companies settled a protracted legal battle.
The supply deal ends this year, meaning that the iPhone, which Apple is expected to announce on Tuesday, will be the last phone to debut under the deal.
Under a deal announced Monday, Qualcomm said it would supply Apple with chips for its annual cell phone launches through 2026. Qualcomm did not disclose the amount of the deal, only saying the terms were “similar” to previous deals.
Apple did not immediately respond to a request for comment.
In an Aug. 3 research note, UBS analysts estimated that Qualcomm sold $7.26 billion in chips to Apple in 2022.
Qualcomm also said the patent licensing deal it signed with Apple in 2019 is still in place. The deal expires in 2025, but both companies have the option to extend the contract for another two years.
“At a time when Apple is facing increasing difficulties in China, strengthening its supply chain in other regions is a priority, and will the company backtrack on plans to go solo with its own chip production in more areas? , at least seems to be postponed,” said Susannah Streeter, head of money and markets at Hargreaves Lansdowne.
Apple has been working on developing its own modem technology, and in 2019 spent $1 billion buying a modem unit from Intel (INTC.O). Apple didn’t say how quickly it plans to increase the use of its own chips.
Qualcomm said Monday that financial projections assume that by 2026, only one-fifth of Apple’s iPhones will use the company’s chips.
However, Qualcomm made a similar prediction for its business with Apple in 2021 that proved overly conservative, with all iPhone 14 models launched last year using Qualcomm modems.
And last year, Qualcomm Chief Financial Officer Akash Palkiwala updated his forecast for the 2023 iPhones launching this week, saying he expects “the majority” of them to have Qualcomm modems. Ta.
Reported by Stephen Nellis of San Francisco. Additional reporting by Yuvraj Malik, Bangalore.Editing: Miral Farmie, David Holmes, Richard Chan
Our criteria: Thomson Reuters Trust Principles.