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Appleis (NASDAQ: AAPL) Dreams of making a modem at home have been an open secret for years. The company has been hiring modem engineers for quite some time, even expanding its physical presence in San Diego, where Qualcomm (NASDAQ: QCOM) is based, to better capture the talent of your supplier. Last year, Apple abruptly resolved a two-year legal war with Qualcomm after Intel failed to deliver a competitive 5G modem for the iPhone.
In the most outspoken sign of its plans, Apple quickly announced that it would buy the pieces of Intel’s smartphone business for $ 1 billion (the deal closed in December 2019). It should come as no surprise that Apple is now hard at work developing a proprietary modem.
Image source: Apple.
It has no “core” other than cellular connectivity
Bloomberg reports that Apple’s chip chief Johny Srouji internally confirmed to employees that the Mac maker “began development of our first in-house cellular modem” in 2020. The move will allow for “another key strategic transition” following the recent introduction. Apple’s M1 chip. its first internal Mac processor that displaced Intel. That transition is expected to take about two years, as Apple introduces more M-series chips, which will proliferate within the Mac portfolio.
Apple has been aggressively outsourcing the development of anything it considers a “core technology.” Few technologies are as critical to a mobile device as the cellular baseband modem, which facilitates connections to the various cellular networks around the world. In no uncertain terms, Apple made its ambitions clear earlier this year in an earnings call.
“As you know, we bought the baseband activities of Intel,” said CFO Luca Maestri. “And obviously, we want to develop that technology because we consider it to be a core technology for us.”
Apple is ready to ditch Qualcomm
Despite these messages, Qualcomm shares still fell yesterday on the news. The threat – Apple accounts for more than 10% of Qualcomm’s revenue – has become so inevitable that Qualcomm has added new language to the risk factors section of its latest annual report to warn investors.
“In December 2019, Apple acquired Intel’s modem assets and is developing its own modem products using these assets,” Qualcomm wrote. “Accordingly, Apple is expected to use its own modem products, rather than our products, in some (or all) of its future devices.”
One more thing should be clear from the legal battle: Apple absolutely hates doing business with Qualcomm. Chief Executive Officer Tim Cook made no effort to criticize Qualcomm as the two companies were actively fighting in court, claiming Qualcomm’s business practices were “illegal” and that it charges “exorbitant prices.”
Apple had no choice but to give in due to the great strength of Qualcomm’s technology portfolio, but there should be little doubt that Apple would strongly prefer to cut ties with Qualcomm once it becomes feasible without adversely affecting the competitiveness of the iPhone in the market. of smart phones.
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