Apple is set to launch its much-awaited cellular modem chips in 2025, a move that will significantly change its deal with Qualcomm, its long-term supplier of modem components. According to a report from Bloomberg News, Apple’s new chips will first come in the iPhone SE, the company’s entry-level smartphone that is due for its first upgrade since 2022, next year. For the rest of the period, Apple intends to ramp up its modem launch with expectations of surpassing Qualcomm by 2027.
It is after its increasing focus on reducing external dependence that the company announced the move. The company spent $1 billion to purchase Intel’s modem unit, and then brought its engineering efforts for modem into a unit responsible for the design of its custom processors in 2019. Apple also invested large sums of money to develop its proprietary modem technology to exert control over its own hardware.
For one, Qualcomm, which has long been an essential partner for Apple and makes chips for its modem to allow the company’s mobile devices to connect to 5G networks, has informed investors that it will eventually shift from Qualcomm’s components and change revenue streams significantly. Qualcomm has, however managed to win a contract that ensures the company continues to supply chips to Apple until at least 2026. Investors are keenly following Qualcomm’s diversification efforts, especially in segments such as AI-based data centers and laptop chips, as the revenue is expected to fall due to the reduction from Apple.
Apple’s decision to in-source its modem production is a bold step toward becoming more independent. In line with the general strategy, the company signed a deal worth many billions of dollars with Broadcom last year to work on 5G radio frequency components. The impact of this deal will also be reflected in other suppliers such as Skyworks Solutions and Qorvo, which have been primary wireless communication component suppliers to Apple for decades.
It wants to not just replace but also overtake Qualcomm by 2027. Such a move will significantly reshape the competitive dynamics of the mobile chipset market, and therefore, the eyes of the tech industry would closely be on how well the company goes about developing this next generation of modem technology.
