Qualcomm to supply 5G chips to Apple until 2026 under new deal

Qualcomm announced on Monday that it has signed a new deal with Apple to supply 5G chips until 2026, news agency Reuters reported.

The new deal is a major win for Qualcomm, as it secures the company's supply of chips to Apple for the next three years. Apple is the world's largest smartphone maker, and its demand for 5G chips is expected to grow in the coming years.

The deal is also a sign of the thawing relations between Qualcomm and Apple. The two companies had been locked in a legal battle for years, but they reached a settlement in 2019.

That supply agreement ends this year, meaning that the iPhones that Apple is expected to announce Tuesday would be the last phone debut under that deal.

Qualcomm did not disclose the value of the deal, but it is likely to be similar to the previous agreement, which was worth $10 billion. The new deal is expected to help Qualcomm maintain its dominance in the 5G chip market.

The deal is a win-win for both companies. Qualcomm gets to secure its supply of chips to Apple, while Apple gets to ensure that its iPhones will continue to use Qualcomm chips for the next three years. This will give both companies a competitive advantage in the 5G market.

Apple did not immediately respond to a request for comment by Reuters.

In a research note on Aug. 3, UBS analysts estimated that Qualcomm sold $7.26 billion of chips to Apple in 2022.

Qualcomm also said a patent licensing deal it signed with Apple in 2019 remains in place. That deal expires in 2025, but the companies have an option to extend it for two years.

"At a time when Apple is running into increasing challenges in China, reinforcing its supply chains elsewhere is a priority, and it appears the company is rolling back or at least delaying plans to go at it alone in more areas with its own chip production," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Apple is working on its own modem technology and spent $1 billion to buy Intel's modem unit in 2019. Apple has not said how quickly it plans to ramp up the use of its own chips.

Qualcomm on Monday said its financial projections will assume that only a fifth of Apple's iPhones will use its chips by 2026.

However, Qualcomm made a similar projection about its business with Apple in 2021 that turned out to be overly conservative, with iPhone 14 models released last year all using Qualcomm modems.

And last year, Qualcomm Chief Financial Officer Akash Palkhiwala updated his predictions for the 2023 iPhones that will be released this week, saying he expected the "vast majority" of them to include Qualcomm modems.

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