September 27, 2023
Apple has struck a chip supply deal with Qualcomm, which shows it’s not ready to go it alone just yet

Apple (AAPL) and Qualcomm (QCOM) revealed on Monday that they have reached a new chip supply agreement.

The partnership states that Qualcomm will provide its Snapdragon 5G modem‑RF systems for Apple’s smartphones launching from 2024 to 2026. Financial terms of the deal are not being shared, a Qualcomm spokesperson confirmed to Yahoo Finance.

After years of trying to control its own destiny by making its own chips, Apple has teamed up with Qualcomm to make it clear that the company is not ready to go it alone.

A guest holds the new iPhone 14 at an Apple event at its headquarters in Cupertino, California, US on September 7, 2022. Reuters/Carlos Barria

For modem chips, which facilitate wireless connectivity, Apple theoretically has the technology in-house — the company purchased Intel’s (INTC) modem chip business in 2019. But clearly the in-house technology isn’t ready for prime time yet.

It also contrasts from earlier this year when Qualcomm CEO Cristiano Amon said he expected Apple to make its own modem for 2024.

Apple has been very clear about its desire to replace its own suppliers. In 2020, Apple famously ended a 15-year partnership with Intel, citing plans to build Macs with its own chips. Since then, a whole range of Macs have come out with Apple’s own chips.

Smartphones, however, have been a different story, and the supply chain is a bit more complex, as iPhones still run on Arm-based chips. Although Apple manufactures those chips for iPhones in-house, they license the underlying architecture from Arm.

It has been estimated that Apple could save billions by taking control of its chips.

Apple and Qualcomm have a tainted history of their own, including a years-long legal battle over licensing terms. Both companies agreed to discontinue the litigation in 2019.

This is the second consecutive agreement between Apple and Qualcomm and its structure is similar to the previous deal.

For Qualcomm and other Apple suppliers who are worried about their future, this agreement is good news for now.

A Qualcomm spokesperson said the deal is not included in the company’s guidance for this year and that they may have to change the guidance when they next report.

The announcement comes on the eve of a key moment for Apple as it prepares to unveil its latest line of iPhones, Apple Watches and other products. And chips play a role in the potential rise in prices.

“We believe now is the time to increase iPhone prices modestly, as Apple will keep base model prices unchanged, advanced technology, chips and battery technology in the iPhone 15 Pro/Max as part of Apple’s strategic Pricing warrants a move,” Wedbush analyst Dan Ives wrote on Sept. 7.

eli garfinkel Is a senior tech reporter at Yahoo Finance. Follow him on Twitter @agarfinks and on Linkedin,

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