Apple Renews Qualcomm Deal to Supply 5G Chips till 2026

Apple Inc (NASDAQ: AAPL) will rely on an external supply of modern chips to manufacture modern smartphones that support the 5G network amid delays in in-house production. According to an announcement by Qualcomm Technologies Inc, Apple has signed an agreement to extend the deal between the two companies for another three years. Notably, the prior deal between Apple and Qualcomm Technologies was set to expire this year. As a result, Apple’s iPhone 15, which is expected to be released during today’s event, could feature Qualcomm Technologies’ semiconductor chips.

Following the announcement, Apple shares gained slightly on Monday to close the day trading at $179.36. Worth noting that AAPL shares are up approximately 38 percent YTD fueled by the launch of several new products.

Apple and Modern Chip Supply

Apple has been moving towards full in-house production of semiconductor chips in a bid to enhance the speed and performance reliability of its products. In June last year, Apple announced the onset of the production of the M2 chip to replace its predecessor M1. The company highlighted that M2 delivers a power-efficient performance with a faster CPU and GPU. Moreover, the M2 consists of 20 billion transistors, which is about 25 percent more than M1.

However, the company has not yet finalized its in-house production of 5G semiconductor chips. As a result, Apple has continued to outsource its semiconductor chips in a bid to compete with Asian smartphone giants like the Huawei Mate 60 Pro that was recently unveiled. Interestingly, Huawei has managed to navigate the sanctions issued by the United States government to tap into its chip technologies in the latest products.

Notably, Apple was reportedly working with Taiwan Semiconductor Manufacturing Co. to reduce its reliance on Qualcomm Technologies products in this year’s launch. Reportedly, Apple was to use the TSMC 4-nanometer chip technology to mass produce the fiat batch of its 5G iPhones in 2023.

However, Apple’s decision to proceed with Qualcomm products showcases the latter’s capabilities to deliver dominant performance in 5 G-related products. Nonetheless, the deal is expected to have minimal effect as Qualcomm Technologies will only supply about 20 percent of Apple’s modern iPhone devices with its Snapdragon 5G modern-RF system.

The deal comes after Apple purchased the majority of Intel’s smartphone modem business just three months after settling a lawsuit over Qualcomm’s patent licensing practices in 2019.

Bigger Picture

The semiconductor war between the United States and China has recently escalated as neither wants to lose dominance in emerging technologies, especially artificial intelligence (AI). With the United States having issued its sanctions, China, a major producer of semiconductor manufacturing raw materials, has restricted the export of most rocks.