Qualcomm said Monday that it will supply Apple with 5G modems for smartphones through 2026.
Wall Street analysts and Qualcomm officials had previously said they expected Apple to use an internally developed 5G modem starting in 2024.
The continued sales to Apple will boost Qualcomm’s handsets business, which reported $5.26 billion in sales in the quarter ended in June, and could soften the blow of potentially losing a critical customer. About 21% of Qualcomm’s fiscal 2022 revenue of $44.2 billion came from Apple, according to a UBS estimate.
Qualcomm currently supplies Apple with 5G modems for its iPhones, but Apple has been working to build its own modems to move away from Qualcomm chips. It purchased Intel‘s smartphone modem division in 2019 to build its own modem. However, analysts have suggested that it will be challenging for Apple to move away from Qualcomm’s chips because of their complexity.
Qualcomm also makes money from Apple through cellular licensing fees, which were about $1.9 billion in 2022, according to the UBS estimate.
Qualcomm continues to collect royalties from Apple under a six-year agreement, it said. That agreement was struck at the end of a legal battle between Apple and Qualcomm over royalties that was settled in 2019.
Qualcomm says that it expects to only supply 20% of the modems needed for Apple’s 2026 smartphone launch, signaling that it likely still expects the Apple business to eventually decline. A Qualcomm official said the company was not updating its guidance to take in account the Apple sales.
Apple is expected to announce new iPhones, likely called iPhone 15, on Tuesday, which will use Qualcomm modems.
CNBC has reached out to Apple for comment and will update this story accordingly.
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