By Stephen Nellis
(Reuters) – Qualcomm on Monday said it had signed a new deal with Apple to supply 5G chips to the iPhone maker until at least 2026.
Qualcomm, whose shares rose more than 8% in premarket trading, is the leading designer of what are known as modem chips that connect phones to mobile data networks.
The San Diego, California-based firm previously signed a supply deal with Apple in 2019, after the two companies settled a protracted legal battle.
That chip supply agreement ends this year, meaning that the iPhones that Apple is expected to announce Tuesday would be the last phone debut under that agreement.
Under the deal announced Monday, Qualcomm said it will supply Apple with chips for phones that will come out each year until 2026. Qualcomm did not disclose the value of the deal, saying only that the terms are “similar” to its previous agreement.
Qualcomm also said that a patent licensing deal it signed with Apple in 2019 remains in place. That deal expires in 2025, but the companies have an option to extend it for two years.
Apple is working on its own modem technology and spent $1 billion to buy Intel’s modem unit in 2019. Apple has not said how quickly it plans to ramp up the use of its own chips.
Qualcomm on Tuesday said that its financial projections will assume that only a fifth of Apple’s iPhones will use its chips by 2026. However, Qualcomm made a similar projection about its business with Apple in 2021 that turned out to be overly conservative, with iPhone 14 models released last year all using Qualcomm modems.
(Reporting by Stephen Nellis in San Francisco; Additional reporting by Yuvraj Malik in Bengaluru; editing by Miral Fahmy)
