Qualcomm and 5G logos are displayed at Mobile World Congress (MWC) in Shanghai, China on June 28, 2019.
On Monday, Qualcomm (QCOM.O) announced that it had signed an agreement with Apple (AAPL. O) to supply 5G chips until at least 2026, in response to the iPhone maker’s mounting difficulties in China and efforts to strengthen its supply chains in other regions.
Apple is not rushing to release its own modem, despite moving all its computers to processing chips designed by the company, as the agreement extends a relationship worth billions of dollars to Qualcomm for at least three years.
Early afternoon trading saw a 4% increase in shares of Qualcomm, the company that designs modem chips that connect phones to mobile data networks. Apple sharesmeanwhile, increased by 0.5%.
After a prolonged legal dispute, Qualcomm and Apple came to an agreement for supplying their chips in 2019, with the former signing on behalf of San Diego-based Qualcomm.
The iPhones that Apple is expected to announce on Tuesday will be the final phone debut under the supply agreement, which ends this year.
Apple will receive chips from Qualcomm until 2026 under the agreement, which is similar to its previous agreement.
Apple did not respond immediately to a comment request.
According to a research note released by UBS analysts on Aug. 3, Qualcomm sold $7.26 billion of chips to Apple in 2022.
The patent licensing agreement that Qualcomm and Apple signed in 2019 is still valid, but it will expire in 2025. However, the companies have the option to extend it for a second time.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, remarked that Apple’s focus on China is to strengthen its supply chains and delay its plans to pursue more areas with chip production.
In 2019, Apple spent $1 billion on purchasing Intel’s (INTC.O) modem unit, and the company is currently working on its own modemeter technology.
By 2026, Qualcomm’s financial projections suggest that only a fifth of Apple’d iPhones would utilize its chips, as announced on Monday.
Despite its similar projection with Apple in 2021, Qualcomm was found to be too conservative, as evidenced by the use of Qualcomm modems in iPhone 14 models released last year.
Akash Palkhiwala, the Chief Financial Officer of Qualcomm, revised his expectations for the 2023 iPhones this week by stating that most of them would have Qualcomm modems.
In San Francisco, Stephen Nellis was the reporter, while Yuvraj Malik provided additional reporting in Bengaluru. Meanwhile, Miral Fahmy, David Holmes, and Richard Chang edited the book for it.
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