Apple Unlikely to Design out Qualcomm in Near Term
November 06, 2017
The Wall Street Journal reported Apple may be designing iPhones and iPads for next year that would jettison the Qualcomm’s components, a business estimated at roughly $1.5-$2.0B in revenue (depending on iPhone volumes) at a total of roughly $15/phone. Apple paid $2.8 billion last year in Qualcomm royalties, which accounted for nearly 30% of the chipmaker’s per-share earnings, according to Macquarie Capital. While Apple, Intel and Media Tek have long-term aspirations to work together on iPhone chip manufacturing that could threaten Qualcomm in the long term, Apple’s shifting away from Qualcomm's modems in 2018 or 2019 is very unlikely because:
The WSJ story seems to be more of a negotiating tactic by Apple than a credible near-term threat to Qualcomm. Qualcomm could be well ahead of the competition for 5G and 5G capable devices should start shipping in 2019 and Apple would want to be an early adopter of 5G to maintain its premium pricing.
Separately, Bloomberg reported that Qualcomm filed yet another new lawsuit against Apple accusing the iPhone maker of using its chip software access to benefit Intel. The filing marks the latest in an ongoing legal war that started with Apple accusing Qualcomm of charging unfair royalties then asking a court to invalidate Qualcomm’s business model. Qualcomm accused Apple of throwing its weight around to get a bargain then asked a court to block iPhone sales. In Qualcomm’s earnings report, the full-year QTL segment sales had fallen 16% due to Apple and another unnamed licensee withholding royalty payments.