WSJ: Is the sky falling for Apple’s RF components?

From Dan Gallagher’s “Apple’s Chip Dreams Haunt Its Suppliers” ($) in Saturday’s Wall Street Journal:

Chip makers supplying Apple should have learned by now to always consider that business temporary. That doesn’t mean it’s worthless.

Intel is only the most recent example, finally losing its place in some of the Mac computer lineup to in-house central processors developed by Apple. Qualcomm might be next on the chopping block. Apple’s senior vice president of hardware technologies, Johny Srouji, told employees in a company town hall Thursday that Apple is working on its own modem chips, according to a report by Bloomberg. Modem chips are Qualcomm’s largest business with Apple, with the two companies having recently re-established their relationship following a bitter, multiyear legal dispute.

The news took down Qualcomm’s share price by 7.4% Friday. It also seemed to hang over other prominent Apple suppliers such as Broadcom (-1.03%), Qorvo (-3.59%) and Skyworks Solutions (-4.33%). All supply radio frequency, or RF, components used in the iPhone. Broadcom shares were down 1% in morning trading despite the company having reported strong results for its fiscal fourth quarter late Thursday. Atif Malik of Citi predicted that Apple would likely look to in-source RF chips after it develops its own modem, given how tightly those components have to work together.

But even for Qualcomm, the pain of being replaced by Apple is still some way off—if it happens at all.

My take: Go ahead, bet against Apple. See what happens.

8 Comments

  1. Romeo A Esparrago Jr said:
    All bets (and gloves) are off! 🙂

    3
    December 12, 2020
  2. David Emery said:
    Qualcomm’s terrible behavior on patent licensing means I’ll shed zero tears when they’re no longer an Apple supplier.

    7
    December 12, 2020
  3. Jerry Doyle said:
    Senior management is ill-advised to hold major staff meetings and make announcements the company knowingly has no intentions of fulfilling. Senior management do, sometimes, make announcements that they later find they were not able to fulfill due to some operational, administrative, management or budgetary reason. It is not in Apple’s DNA to make public bluffs.

    I listened to and read several analysts writings yesterday saying such (Apple’s bluffing) about Apple’s intentions. This is why PED’s group is well informed and knowledgeable about how Apple operates. Who among us believes Apple is “bluffing?”

    It may take a few years, but one day Johny Srouji will announce publicly at one of Apple’s big news events Apple’s very own modem chips. Steve always said he wants “to own the whole Apple experience.” That mantra is in Apple’s senior management DNA today, as yesterday, when Steve was alive.

    7
    December 12, 2020
    • Peter Kropf said:
      I think we can assume Apple’s modem chip will be implemented as a modem function within some future Apple M line SOC.

      This is what Qualcom is doing now on its ARM SOCs.

      Working the modem onto the SOC will reduce cost and power, and increase performance.

      What I like about Apple’s leadership team and their strategic intelligence is that the choices they make are almost never an “unforced error”. And many times, after a few years, are celebrated as brilliant.

      7
      December 12, 2020
      • David Drinkwater said:
        I agree with you on this. Yes, at some time in the future, apple will announce its own cellular modem.

        I think the only “mistake” here is that information that was contained in an internal Apple meeting escaped to the public today.

        Someone internal to Apple is not fulfilling their NDA obligations.

        0
        December 13, 2020
  4. Fred Stein said:
    Adding to Jerry and Peter:

    Apple’s deep integration gives them (and us customers / investors) buttery smooth experiences with ever increasing robustness and battery life at competitive prices.

    Soon enough we’ll see a ‘mini’ with the capabilities of the current Pro Max with 3 nm chips that include 5G.

    5
    December 12, 2020
  5. John Konopka said:
    I’m not sure what the point of this article is. Aren’t most business relationships temporary?

    2
    December 12, 2020
  6. Michael Goldfeder said:
    When Apple settled the legal case against Qualcomm concurrently with Intel abandoning the 5G modem race, it became apparent that Tim Cook was only resolving the case to maintain a steady supply chain of modems. The previous purchase of Intel’s modem operations was to create Apple’s very own supply chain for the not too distant future.

    IMO, the Qualcomm issue with the royalties being tied to the sale price of each iPhone is something that still burns intently inside of Tim Cook. The settlement reached was more of a capitulation, as Tim Cook is determined to make Qualcomm an insignificant non contributor in the future production of all iPhones moving forward by making a better modem in house.

    That was evidenced by opening up the Apple modem HQ division in San Diego as a shot across the bow to Qualcomm that they will no longer be involved in anything iPhone related very soon. That clock is ticking each day and Qualcomm will soon be left to supply the android market only. Not the upper end iPhone market.

    I own Apple stock because Tim Cook provides unparalleled leadership and vision to deliver the best products to the consumer, and at the same time will not be bullied by anyone. Even the President of the United States or the entire EU.

    6
    December 12, 2020

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