In 2025, Apple intends to introduce its own wireless chip, eventually replacing the Broadcom chip presently utilized in iPhones for Wi-Fi and Bluetooth connectivity.
Apple is Broadcom's largest customer, accounting for roughly 20% of the chipmaker's revenue in the previous fiscal year, amounting to nearly $7 billion. This is bad news for the chipmaker.
Qualcomm received 22% of its annual sales from Apple, amounting to nearly $10 billion, even though the company has warned for years that its reliance on Apple will diminish.
PCMAG reports that even if Broadcom loses the wireless chip order in 2025, it will still be an Apple supplier because it provides Apple with radio frequency and wireless charging chips.
However, Apple intends to replace those with in-house components in the future.
A Blow for Broadcom
These moves will have a further destabilizing effect on the chip industry, which reaps billions of dollars by supplying Apple with components.
As per Bloomberg, Broadcom shares were down as much as 4.7% on the news before recouping. The stock closed at $576.89, a 2% decrease. Meanwhile, Qualcomm fell 1.6% before closing at $114.61, down 0.6%. Apple increased by 0.4% to $130.15.
According to Statista data, Broadcom's revenue in 2022 amounted to 33.2 billion US dollars, an increase from the previous fiscal year's revenue of 27.45 billion US dollars. Could this year see a drop as a result of Apple's exit?
The Cupertino-based company already uses its own Apple Silicon chips instead of most Intel Corp. processors in its Mac computers. The most prominent manufacturers of wireless electronics are now being affected by the changes.
Based on a Reuters report, Qualcomm affirms Apple will phase out its chips. According to Jefferies analyst William Yang, Apple uses Qualcomm's X65 5G modem in its iPhone 14 line and is anticipated to use a fresh copy of the same chip in the iPhone 15 models that will be released later this year.
However, the turnaround has been a long time coming. In June, the United States Supreme Court denied Apple's request for a hearing on the Qualcomm patent lawsuit. The Cupertino tech giant wants to revoke two smartphone patents issued by the chipmaker.
What's Next?
Apple began developing its own 5G cellular modem for the iPhone in 2020 after purchasing Intel's 5G modem business in 2019. PCMAG tells us that many anticipated that chip to be ready for the iPhone 15 later this year, but overheating issues during development have prevented that until at least 2024.
Also, according Ming-Chi Kuo, Apple's iPhone 15 5G modem integration attempt may have already failed. The well-known Apple analyst made his prediction on his official Twitter account in June 2022.
Therefore, Qualcomm will continue to place orders for the 5G modem used in this year's iPhones.
According to a Qualcomm spokesperson, the company's November statement stated that it expects "minimal contribution from Apple product revenue in fiscal '25."
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