Apple extends Qualcomm contract to 2026 amid modem development hurdles

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Apple extends Qualcomm contract to 2026 amid modem development hurdles

Apple Inc (NASDAQ: AAPL ). has decided to extend its contract with Qualcomm (NASDAQ: QCOM ) Inc. for key technology components until 2026, signaling a wind down in its plans to produce its own modems for iPhones and certain iPads. Despite acquiring Intel (NASDAQ: INTC )'s modem division in 2019 for $1 billion under CEO Tim Cook's direction, Apple has faced persistent challenges in software and hardware development that have hindered its progress.

The tech giant's endeavors to enhance modem speed began in 2018 but have yet to yield the anticipated breakthroughs, prompting a reduction in investment. This development contrasts with Apple's successful in-house production shift, notably the transition to Apple Silicon, which has significantly benefitted its product lineup, including iPhones, iPads, and Macs.

This strategic pivot underscores the difficulties Apple has encountered in its quest for production autonomy. The reliance on Qualcomm as a supplier for crucial components is expected to continue, as the setbacks in Apple's own modem project suggest that the company is not yet ready to sever ties with its long-standing partner. The news, shared by industry insiders yeux1122 and @Tech_Reve on X (formerly Twitter), indicates a notable shift from Apple's usual approach of internalizing production to maintain control over its technology ecosystem.

InvestingPro Insights

As Apple Inc. renews its partnership with Qualcomm Inc ., it's worth noting the financial health and market performance of both companies to understand the broader context of this decision. According to InvestingPro data, Apple is currently trading at a high price-to-earnings (P/E) ratio of 30.7, suggesting a strong investor confidence in its earnings potential despite a slight revenue decline of -2.8% over the last twelve months as of Q1 2023. This aligns with an InvestingPro Tip highlighting Apple's high earnings quality, as its free cash flow continues to exceed net income, indicating robust financial health.

On the other hand, Qualcomm, a prominent player in the Semiconductors & Semiconductor Equipment industry, has a P/E ratio of 19.78, reflecting a more moderate valuation by the market. Notably, Qualcomm exhibits a strong return on assets at 14.46%, supporting an InvestingPro Tip that recognizes the company's high return on invested capital.

For readers interested in a deeper analysis, InvestingPro offers additional insights into both Apple and Qualcomm's financial metrics and future prospects. Subscribers can access a comprehensive list of 21 InvestingPro Tips for Apple and 14 for Qualcomm, which include evaluations of dividend reliability, debt levels, and profitability forecasts. These tips provide valuable context for investors considering the implications of the extended contract between the two tech giants.

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This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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