Apple needs Qualcomm for 5G modem chips, but for how long?

April 18, 2019 12:23
A file picture shows a Qualcomm baseband modem integrated circuit chip embedded in the hardware of an Apple iPhone 6 device. Photo: Bloomberg

Apple and Qualcomm have settled their two-year legal battle in relation to patent and licensing issues, with the firms announcing on Tuesday that they agreed to drop all lawsuits against each other. Under the deal, the two tech giants have a global patent license agreement as well as a chipset supply arrangement.

Following the surprise settlement, Apple will be able to use Qualcomm's 5G baseband chip in iPhones starting from 2020.

According to a joint press statement, the deal between both companies includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.

Apple has been working toward developing its own 5G baseband chip in the past few years. However, the progress has not been swift enough so as to ensure a chip ready by next year. Given the situation, Apple had no choice but to settle its disputes with Qualcomm if it wanted stable supply of 5G modem chips.

Shortly after the announcement, Intel Corp, Apple's current modem supplier, declared that it would be exiting the smartphone modem chip business and that it won't be making 5G phone chips at all.

Earlier, Intel had said that it was not in a position to get a 5G chip ready until 2020. That meant that even if the company had developed a chip, the earliest that Apple could launch a 5G iPhone was 2021. That is because new modems will require months of testing before they can be brought into the phone hardware and ensure that the devices will work on carrier networks.

Apple could not afford such delay, given the fact competitors such as Samsung and Huawei have already announced their 5G products and are preparing for launches this year.

Now, with the latest deal, the iPhone maker can fall back on Qualcomm for modem chips, putting it in position to roll out 5G smartphones as soon as 2020.

Apple had relied exclusively on Intel chips since last year, but now it can once again use Qualcomm chips inside its mobile devices such as iPhone and iPad.

Intel has been a chip supplier for Apple since iPhone 7 series, but the fact is that making modem chips for mobile devices was not really its core strength. Many users have complained that iPhones using Intel baseband chips were suffering from slower internet connection speeds than those that deployed Qualcomm products.

As the relationship between Qualcomm and Apple deteriorated in the past two years, all the current iPhone XS and XR series were equipped with Intel modem chips.

But Intel chips will not be found inside any upcoming iPhone models anymore. Intel has decided to exit the 5G mobile modem market to focus its efforts more on 4G and 5G modems for PCs and smart home devices, as well as on its broader 5G infrastructure business.

Intel is no doubt losing a potential huge market from mobile devices. However, the company had to face the fact that it was lagging behind in developing 5G chips, and Apple couldn't afford to wait beyond 2020 to roll out 5G phones.

Talking about Apple, the firm didn't really have much choice but to reach out to Qualcomm for a deal.

That, however, doesn't mean that the iPhone maker will depend solely on Qualcomm for its smartphone modem chip needs in future. 

Apple has set up a team to develop its own modem chips for use in iPhones and iPads, several media outlets had reported previously. In February, Apple shifted its modem chip engineering team into its in-house hardware technology group from its supply chain unit, CNBC said at that time.

The move was seen as an effort by Apple to accelerate the modem chip project. 

As Samsung and Huawei have been using self-developed modem chips for a long time, it’s time for Apple to catch up with its own such chip. Apple may benefit by combining its modem chips with its processor chips, as Samsung, Huawei and most other phone makers do. That saves space and battery life, as Reuters noted in a Feb. 7 report.

Apple is known to favor a self-sustaining and long-term arrangement when it comes to hardware supply. Developing its own modem chip can help the tech giant fill a gap in its iPhone and iPad development.

Such move will enable Apple to reduce its reliance on external chip makers such as Qualcomm, Intel, Samsung and Huawei, as well as customize the modem chips for iPhone and iPad.

As the new deal between Qualcomm and Apple will run at least until 2025, Apple has sufficient time to build its own modem chip. When the company readies its own product, don't be surprised if Apple once again casts aside Qualcomm as a supplier.

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EJ Insight writer