Apple iPhone's own 5G baseband chip development unsuccessful, but Qualcomm sooner or later to say goodbye to Apple business

Recently Tianfeng Securities analyst Ming-Chi Kuo sent a message saying that Apple's 5G baseband chip development may have been declared a failure. He thus predicted that Qualcomm could retain all the baseband chip business for the iPhone series launched at the end of 2023. However, the Wall Street Journal reports that Kuo and his sources may have been misinformed.

The Wall Street Journal reports that Qualcomm told analysts last year that it expects to own about 20 percent of Apple's iPhone business during this product cycle, and Bernstein's Stacy Rasgon estimates that retaining the entire iPhone business would add $4 billion to $6 billion in revenue for Qualcomm in the fiscal year ending September 2024, 8 percent to 12 percent higher than Wall Street's Current forecasts are 8 to 12 percent higher. But neither Qualcomm nor Apple has commented publicly on the report.

The report suggests that despite the notorious complexity of baseband chip development - even chip giant Intel has tried unsuccessfully to develop a baseband for the iPhone - Apple's deep pockets and hefty annual R&D budget (which totals more than $24 billion, more than three times what Qualcomm spends) don't necessarily mean Apple won't eventually achieve that goal. In addition, Apple has always wanted to have more control over the chips it uses - after all, chips designed in-house end up costing less than those purchased from outside suppliers, and allow the company to align its designs more closely with its devices. Therefore, Apple's development of its own baseband chip is not in doubt, it's just a matter of time.

The report also points out that Apple and Qualcomm also had a feud that culminated in a legal battle between the two companies that lasted for years and was settled in 2019, mainly because Apple needed Qualcomm's baseband chips to get its 5G iPhone to market on time. But Ed Snyder, a longtime wireless chip market researcher at Charter Equity, noted that Apple remains "hell-bent on getting rid of Qualcomm and has made its modem efforts a top investment priority for the company in recent years." He expects Apple to develop a baseband chip for the 2024 iPhone, and will completely replace Qualcomm in the following year.

Thus, Qualcomm may still be able to "get a taste or two" from Apple. And one or two more years of Apple's business may give Qualcomm extra cash flow to invest in mergers and acquisitions and other diversified business development. Qualcomm has been working hard in recent years to reduce its dependence on Apple, and has touted that vision to Wall Street. Qualcomm said at an analyst meeting last fall that it expects Apple's share of its chipset business to be in the single-digit percentage points by the end of fiscal 2024.