Apple’s ongoing endeavor to phase out Qualcomm from its devices is likely to be more protracted and challenging than anticipated. This struggle, reminiscent of Nokia’s historical battle with Qualcomm two decades prior, underscores the complexities of cellular technology and the intricacies of patent licensing. While Apple’s persistence is undeniable, the eventual impact of replacing Qualcomm may be less significant than it currently appears.
A History of Disputes and Acquisitions
The Apple and Qualcomm saga dates back many years, echoing a similar conflict between Nokia and Qualcomm twenty years ago. Despite Nokia arguably gaining an upper hand in their initial dispute, Qualcomm emerged victorious in a decisive legal battle against Apple in 2019. This win stemmed from Apple’s reliance on a specific 5G technology solely provided by Qualcomm for its iPhones.
Since then, Apple has been determined to eliminate its dependence on Qualcomm’s silicon, acquiring Intel’s modem business in 2019 with the aim of developing its own 5G modems. This strategic move, while potentially allowing Apple to reignite legal disputes over royalties, has proven to be more complex than initially anticipated.
The Challenges of Cellular Technology
Apple’s initial goal was to replace all Qualcomm chips by 2024. However, the intricate nature of cellular radios, which Qualcomm has specialized in since its inception as Quality Communications in 1985, has posed a significant hurdle. While Apple excels in processor design, the expertise required for cellular communication extends beyond chip proficiency.
The intricacies of analogue radio systems, evolving standards, and diverse radio frequencies demand extensive experience, a factor that Apple seemingly underestimated when it acquired Intel’s second-rate radio modem business, originally from Infineon. This “black art” of wireless communication has presented ongoing challenges for Apple.
A Moving Target
Despite these obstacles, Apple is projected to launch an entry-level iPhone with its own silicon in 2025. If successful, the plan is to gradually phase out Qualcomm, mirroring its replacement of Intel. However, this strategy hinges on Apple’s ability to master wireless communication, a constantly evolving field.
As cellular standards, including the upcoming 6G, continue to advance, Apple’s lack of significant participation in standard-setting committees may hinder its ability to lead in this domain. Consequently, Apple might struggle to replace Qualcomm in its high-end devices, which demand cutting-edge radios with optimal performance.
The Diminishing Significance of Apple’s Modem Business
Even if Apple eventually matches Qualcomm’s capabilities, the growth of non-smartphone businesses may render the loss of Apple’s modem business less impactful for Qualcomm. The market’s current preoccupation with Qualcomm’s Apple business, despite its declining significance, often leads to market fluctuations whenever such developments arise.
These market wobbles, however, could present investment opportunities in Qualcomm, highlighting the importance of a long-term perspective in evaluating the company’s prospects.
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