Apple has extended its contract to buy modem chips from Qualcomm by three years, a sign that it will take longer than expected to develop the chips in-house.Qualcomm said in a statement on Monday that the new agreement would cover "smartphones launched in 2024, 2025 and 2026." The agreement between the two companies was originally scheduled to end this year, and the latest iPhone, scheduled to be released on Tuesday, was originally expected to be one of the last iPhones to use Qualcomm modem chips.
However, contrary to market expectations, Qualcomm will maintain its position in Apple's supply chain. Compiled data shows Apple is Qualcomm's largest customer, accounting for nearly a quarter of its revenue. And the relationship helps bolster Qualcomm's claim that the company has the best smartphone modems. The modem is a key component in a smartphone, allowing it to connect to the Internet and make calls. Starting with iPhone 12, this chip has begun to support faster 5G networks.
"This agreement solidifies Qualcomm's continued record of leadership in 5G technology and products," the San Diego-based chipmaker said. Although the financial terms of the new agreement were not disclosed, Qualcomm said it was similar to the previous agreement signed in 2019.
For Apple, the move signals that developing its own modem components is more challenging than expected. Apple launched a project to develop its own modem chips in 2018, and its acquisition of Intel's smartphone chip business in 2019 also helped this plan.
In 2020, Apple said developing its own modem was a "key strategic transition," and its chip business chief Johny Srouji said at the time that the work was proceeding at full speed.
Some analysts had expected the component to be ready for the 2023 iPhone, but Qualcomm overturned that speculation last year. Apple is still considering launching the modem in late 2024 or early 2025. Now it looks like the project will take longer to prepare.
The new deal comes one day before Apple's most important product launch of the year. The company is expected to release the iPhone 15 as well as the latest models of Apple Watch and AirPods at a conference on Tuesday. Apple is counting on the new products to help reverse three quarters of declining sales. The iPhone is Apple's largest single source of revenue, accounting for about half of its revenue.