Qualcomm Could Cut Off Apple Right Now From Its 5G Modem Supply Due To Its Dominant Position, Despite Having To Bear With Some Loss, Says Analyst

Apple has been grinding for years to develop an in-house 5G modem to reduce dependency on Qualcomm and save the billions that it has to pay the San Diego firm to utilize its technology. The company may finally catch a break next year when it unveils the iPhone SE 4, which would be the first handset to tout its custom baseband chip. However, Apple’s licensing agreement with Qualcomm will not end until March 2027, but its plans to set up its supply chain for this particular component have already been set in motion.

While the Cupertino giant has the resources to step away from Qualcomm in a few years, one analyst has implied that the 5G modem maker holds all the cards and it could deal a major blow to Apple by cutting it off from its list of customers that receive modem shipments. While Qualcomm would not benefit from this act, the blow dealt to Apple would be far more injurious, and the California-based titan would be left scrambling to find another supplier.

Apple likely wets Qualcomm’s beak immensely with high sums of money for using the latter’s 5G modems in various devices

On X, top-ranked technology analyst Patrick Moorhead shares his views on the current business relationship between Apple and Qualcomm. Given that the iPhone maker is currently in a tough position, Moorhead says that Apple’s stock could come tumbling down if Qualcomm cuts off supply right this instant. However, it appears that the company already knows that its lucrative customer will achieve dependency at some point, so instead of holding some grudge against Apple, why not use this opportunity to monetize?

Qualcomm likely receives a ludicrous sum from Apple to use its 5G modems in its iPhones, so removing the company’s name from the list of customers will also deal a financial blow to the chipset manufacturer, irrespective of the harm that comes to Apple. It is also possible that the licensing agreement forbids Qualcomm from abruptly ending its business relationship with the Cupertino firm, though those details are not available at this time.

Qualcomm $QCOM has already zeroed out Apple revenue for 2027 and beyond. Keep in mind, Apple has been trying to do this since July 2019 when it bought Intel’s assets. Technically they have been trying to do it for a decade if you count Intel 5G.

My belief: there will be Apple… https://t.co/4wap26PHaN

— Patrick Moorhead (@PatrickMoorhead) December 7, 2024

As for how Qualcomm could have made from 5G modem sales, a ‘Bill of Materials’ analysis of the iPhone 16 Pro Max revealed that based on Apple’s initial 90-million shipment target for 2024, an estimated $2.52 billion could be generated from 5G modem sales alone, with this component reportedly costing $28 apiece. Bear in mind that this figure is just for the iPhone 16 lineup, and Qualcomm could be raking in significantly more because its baseband chips are used in previous-generation iPhones and current-generation iPads, which are sold all across the globe.

As for Apple, its plan to use in-house 5G modems will commence with the iPhone SE 4’s launch, with its end game being to beat Qualcomm and bring mmWave support to the iPhone 18 Pro and iPhone 18 Pro Max. It is also exploring bringing cellular connectivity to Macs, with this technology possibly debuting in a future Apple Vision Pro model.

News Source: Patrick Moorhead