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Qualcomm and Apple Extend 5G Chip Agreement

FILE PHOTO: Signs of Qualcomm and 5G are pictured at Mobile World Congress (MWC) in Shanghai, China June 28, 2019. REUTERS/Aly Song

BNR – Qualcomm has announced a contract extension with giant Apple, committing to supply 5G chips until at least 2026.

This partnership expansion comes at a crucial juncture when Apple faces mounting challenges in the Chinese market. Additionally, the company is facing issues in fortifying its supply chains worldwide.

The 3-year extended deal surpasses initial expectations and signifies that Apple is not hastily venturing into developing its own modems.

Rise in Stocks

Qualcomm’s shares witnessed a 4% rise in early afternoon trading, reflecting the positive market sentiment surrounding this collaboration.

Apple shares also rose by 0.5%. Qualcomm, based in California, is a designer of modem chips that enable smartphones to connect to mobile data networks.

This agreement builds upon a chip supply deal between Qualcomm and Apple initiated in 2019. Furthermore, the deal follows the resolution of a protracted legal dispute between the two firms.

The initial supply agreement was set to expire this year, marking the last iPhone release under its terms.

Under the newly unveiled accord, Qualcomm will furnish Apple with chips for annual phone releases until 2026.

The financial specifics of the arrangement remain undisclosed. However, Qualcomm has noted that the terms are similar to the previous agreement.

Qualcomm Sold Billions of Chips to Apple

Apple has not issued an immediate comment regarding this extension. Notably, UBS analysts estimated Qualcomm’s chip sales to Apple reached $7.26 billion in 2022.

Furthermore, Qualcomm emphasised that the patent licensing deal signed with Apple in 2019 remains intact and will persist until 2025.

As Apple contends with mounting obstacles in the Chinese market, enhancing its global supply chains becomes a strategic necessity.

The decision to extend its partnership with Qualcomm indicates a shift away from a rapid pursuit of in-house chip production.

Apple continues to invest in modem technology, including the acquisition of Intel’s modem unit for $1 billion in 2019.

Qualcomm has projected that only a fifth of Apple’s iPhones will be equipped with its chips by 2026. However, previous expert estimates suggest a more significant adoption rate may occur.


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