September 12 news, nowadays, money and time can buy a lot of things. But for Apple, this may not include internal modem chips. According to data from S&P Global Market Intelligence, Apple has more than $166 billion in bank deposits and annual free cash flow of more than $100 billion. Apple's free cash flow was the highest among S&P 500 companies over the trailing 12 months.

Apple has been working for years to develop its own modem chips used in processors in smartphones, tablets and other devices to help manage connections to cellular communications networks. Apple didn't appear to be very cautious about its efforts, with the company saying at a town hall meeting with its then-147,000 employees in late 2020 that it was working on its own modem chips.

But designing such a complex chip is obviously easier said than done. Qualcomm, Apple's current modem processor supplier, recently said the two companies have extended their current chip supply agreement to iPhones launched in 2024-2026. This is two years later than the last time Qualcomm announced that its iPhone business would fade away, and three years later than the company first predicted the end of the business. Qualcomm laid out an ambitious plan at the end of 2021 to diversify its business away from smartphones.

Keeping the iPhone business around for a few more years should give that effort more momentum. Qualcomm's revenue is expected to fall more than 19% this fiscal year as global smartphone sales decline, especially high-end Android devices, many of which use Qualcomm's Snapdragon application processors and modem chips. According to data from market research firm IDC, in the past 12 months as of June this year, smartphone shipments of Samsung, Qualcomm's main customer, fell 14% year-on-year. During the same period, Apple's global iPhone shipments fell only 7%.

But investors still seem inclined to believe that Qualcomm’s Apple business is coming to an end. Qualcomm shares were up nearly 4% on Monday morning, a rather lackluster rebound as one of the worst-performing chip stocks this year. Qualcomm was one of only five stocks in the Philadelphia Semiconductor Index (PHLX Semiconductor Index) to decline this year before Monday's open, making it one of the few stocks to miss out on the sector's rally, which has been driven by hype about generative artificial intelligence.

Qualcomm currently trades at about 12 times forward earnings, 20% below its five-year average. The Philadelphia Composite Index has gained 40% this year and is now 19% above its five-year average, according to FactSet.

Qualcomm deserves more credit. Raymond James analyst Srini Pajjuri estimates that the new deal with Apple will contribute about $5.5 billion in incremental revenue to Qualcomm for the fiscal year ending in September 2025, and as much as $1.70 in adjusted earnings per share. Most people believe that Apple will be almost completely out of Qualcomm's business by September 2025.

This latest news should also be a reminder that Qualcomm remains a leader in a critical technology, especially in a world where more and more devices will be connected to wireless networks around the world. Apple clearly wants to take more control of its own destiny in this world, so there's no doubt it will continue its efforts to make its own modem chips.

But Bernstein analyst Stacy Rasgon said on Monday: "The longer it takes Apple, the harder it may be because cellular technology is not going to stand still." Everyone knows Apple has deep pockets, but not many people seem to understand that Qualcomm's moat against competition is just as strong.