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Apple to reportedly drop Qualcomm as its chip maker in favor of Intel

Last year Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates.

  • Published: February 6, 2018 9:34 AM IST

The AppleQualcomm battle has been long ongoing now. However, things got a little more real recently, when two brokerages recently said that Apple might drop Qualcomm in favour of Intel as the supplier for modem chips in its next generation of iPhones.

“In a detailed note citing extensive channel checks with chip suppliers, brokerage Nomura Instinet said it anticipated that Apple would drop Qualcomm in favour of a handful of other suppliers, as it seeks to reduce materials costs for iPhones,” Reuters reports.

“There is speculation that Apple might drop Qualcomm altogether for its next generation phones and I think that’s part of the reason the stock is down today,” Reuters also reports Angelo Zino, an analyst at CFRA Research, speculating the same.

Qualcomm and Apple have been working together for quite some time now. However the relationship between the two companies turned sour last year when Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates.

The Nomura analyst says that Apple will save more than $100 million in the next iPhone cycle by moving to cheaper Intel modem chips. On the other, Shah calculates that Broadcom Ltd, which is trying to acquire Qualcomm, will likely lose some $400 million worth of sales of Apple parts in the second half of the year to Qorvo Inc.

Late last month, the European Commission slapped a fine of $1.2 billion on Qualcomm for violation of antitrust laws in a series of deals with Apple. The chipmaker allegedly paid Apple for the exclusive use of its chipsets in the iPhones between 2011 and 2016.

The root of the tiff between the two companies is that fact that Qualcomm’s exclusivity in chip supply for iPhones prevented other chip makers from offering similar components that could have been used by Apple. In 2016, Apple started using Intel’s chips for the iPhone 7 and iPhone 7 Plus. Although the iPhone 7 models with Intel chipsets were found to be slower in LTE speeds as compared to Qualcomm models, some reports indicated that Apple planned to completely move away from Qualcomm for the future iPhones.

Meanwhile, Qualcomm is already facing a fine of $773 million by Taiwan’s Fair Trade Commission for having engaged in antitrust and monopolistic practices. As a result of these lawsuits and fines, and Apple withholding royalty payments, Qualcomm claims its revenue is being impacted. For Q4 last year, the company reported net income drop from $1.6 billion to just $168 million year-on-year.

  • Published Date: February 6, 2018 9:34 AM IST