Apple Inc. has fallen further behind in its multibillion-dollar effort to make a modem chip for the iPhone, stymied by the complexity of replacing an intricate Qualcomm Inc. component.
After already delaying a plan to have an in-house chip ready by next year, Apple is now likely to miss a goal to ship the component by the spring of 2025, according to people familiar with the situation. That would postpone the release until at least the end of 2025 or early 2026 — the final year of Apple’s recently extended contract with Qualcomm.
The latest snags reflect the daunting task Apple faces in designing its own modem, which lets phones connect to cellular networks for making calls and browsing the web. The component has to seamlessly link up with hundreds of carriers around the world, working across varied environments and conditions. And it has to perform at least as well as technology from Qualcomm, which helped pioneer the field.
Qualcomm shares climbed as much as 1.1% to $130.37 after Bloomberg reported the news Thursday, reversing an earlier decline. Apple was up less than 1% at $189.45 as of 2:54 p.m. in New York.
Thousands of employees have worked on the project since 2018, and still Apple remains years away from cracking the problem. Its goal is for the modem to download data faster than current technology. But people with knowledge of the project, who asked not to be identified, believe that’s unlikely based on the current state of development.
A spokesman for Cupertino, California-based Apple declined to comment.
Apple’s struggles with modem development burst into public view in September, the day before the unveiling of the iPhone 15. Qualcomm said that it would continue to supply Apple with chips for years to come, making it clear that the in-house effort was struggling.
With that announcement, a relationship that was scheduled to end by 2024 was extended through 2026. But the agreement only confirmed what people inside the company had known for a while: Apple’s work to build its own technology had thus far been a disappointment.
It’s been a long and frustrating journey for the company. The first signal that Apple was trying to build its own modem came more than five years ago, when the iPhone maker started recruiting engineers in Qualcomm’s hometown of San Diego. Months later, Apple announced plans for local offices.
At the time, Apple and Qualcomm were waging a legal battle over modem royalties. But the two companies settled that suit in 2019, and Qualcomm agreed to supply 5G modem chips for the iPhone 12 in 2020 and beyond.
Just a few months after reaching that truce, Apple made it clear that it planned to eventually drop Qualcomm altogether. It agreed to pay $1 billion to buy Intel Corp.’s beleaguered modem division. And Johny Srouji, Apple’s senior-most executive in charge of hardware components, said at a companywide meeting that work on the modem was full steam ahead.
To help the ex-Intel engineers it was getting from that deal, Srouji hired hundreds of other wireless technology experts, including employees from Qualcomm and MediaTek Inc. Apple initially believed it could get its own modem into an iPhone as soon as 2024. Early on in the project, codenamed Sinope, Apple determined that its first device with the chip would be an update to the iPhone SE.
That phone is a lower-budget model that only gets updated sporadically. It doesn’t attract the attention or purchase volume of major new iPhones released ahead of the holiday season. And, importantly, its buyers don’t typically demand cutting-edge technologies. So, for a company trying its hand at a modem for the first time, putting the chip in the SE was seen as a safe choice.
Still, a modem is one of the most important parts of a phone. If it doesn’t work properly, calls can be dropped and users lose their internet connection. Shipping a faulty modem would have been one of the biggest flubs of Tim Cook’s tenure as chief executive officer.
That’s a mess Apple is looking to avoid. Around when the company re-upped its agreement with Qualcomm, the 2024 iPhone SE plan was postponed by a year to 2025. Now people familiar with the work believe a launch might not come until a year after that.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
