Qualcomm Stock Tumbles on Report Apple Will Build Its Own Modem Chips

 

The Apple iPhone 12 Mini.

Brendon Thorne/Bloomberg

After recently making a bold move to produce its own microprocessors for Mac laptops, Apple’s chip wizards are apparently turning their attention to internal production of wireless modem chips for iPhones and other devices.

Bloomberg on Thursday reported that Johny Srouji, Apple’s (ticker: AAPL) senior VP of hardware technologies, disclosed in a town hall meeting with staff that the company has started building modems for future phones. That should not come as a big surprise: In 2019, Apple bought Intel’s (INTC) mobile modem business for $1 billion. The story notes that the latest phones use modem chips from Qualcomm (QCOM). As the story notes, Apple has a six-year licensing deal with Qualcomm as part of a 2019 patent agreement between the two companies.

That news is weighing heavily on Qualcomm shares—and pressuring shares of both Skyworks Solutions (SWKS) and Qorvo (QRVO), which make radio chips for Apple and other mobile phone manufacturers.

Qualcomm declined to comment on the report.

Raymond James chip analyst Chris Caso asserts in a research note that the Bloomberg story contains no new information—that the market was well aware of Apple’s acquisition of the Intel modem business.

“We don’t see anything new,” he writes. “Apple was very clear to us when they acquired the Intel team that they did so with the intention of building their own modem, and eventually replacing Qualcomm. Investors know this, and it’s the principal part of the bear case for Qualcomm. However, the question is about if and when Apple’s initiative will be successful.”

Caso said he asked Apple Chief Financial Officer Luca Maestri about this issue earlier this year, and that while he confirmed plans to build modems, Maestri said it would be a “long journey.”…

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