Apple to Continue Relying on Qualcomm 5G Modems Until 2027, Qualcomm Set to Cash In on iPhone 16 Sales

Apple to Continue Relying on Qualcomm 5G Modems Until 2027, Qualcomm Set to Cash In on iPhone 16 SalesReports suggest that Apple will continue using Qualcomm's 5G modems in its iPhones until at least March 2027. This is a major victory for Qualcomm, even as Apple is expected to use its own custom 5G solution in the budget iPhone SE4, launching in 2024

Apple to Continue Relying on Qualcomm 5G Modems Until 2027, Qualcomm Set to Cash In on iPhone 16 Sales

Reports suggest that Apple will continue using Qualcomm's 5G modems in its iPhones until at least March 2027. This is a major victory for Qualcomm, even as Apple is expected to use its own custom 5G solution in the budget iPhone SE4, launching in 2024. Nevertheless, Qualcomm will still command a significant share of the entire iPhone lineup, making it Apple's exclusive supply chain partner.

Images of the iPhone 16 Pro Max logic board reveal the A18 Pro and the Qualcomm X715G modem, confirming Qualcomm's central role in Apple's latest flagship. Analyst estimates suggest that sales of the 5G modem alone could generate $2.52 billion in revenue for Qualcomm from the iPhone 16 series. This figure is expected to grow as Apple ships more iPhone 16 devices in 2024, leading to substantial profits for Qualcomm.

Recent teardowns reveal that all iPhone 16 models are equipped with the SDX71M 5G modem. While Apple hasn't officially disclosed its 2024 shipment target, reports suggest a goal of 90 million units, a 10% increase from the iPhone 15 series launched last year. This upward trend would further boost Qualcomm's revenue, allowing it to reap significant benefits from Apple's 5G modem sales.

According to a "bill of materials" breakdown provided by TDCowen, the manufacturing cost of the iPhone 16 Pro Max is $32 higher compared to the iPhone 15 Pro Max. Notably, the "modem + transceiver" component is estimated to cost $28. Assuming Apple achieves the 90 million unit shipment target, Qualcomm's 5G modem sales alone would reach $2.52 billion.

Beyond direct modem sales, Qualcomm also holds numerous 5G modem patents, enabling it to collect licensing fees from Apple. Therefore, the $2.52 billion figure likely represents just the tip of the iceberg when it comes to Qualcomm's earnings from the iPhone 16 5G modem business.

It's worth noting that while Apple has been striving to develop its own 5G modems and plans to gradually reduce its reliance on Qualcomm in the future, Qualcomm appears to be Apple's primary 5G modem supplier for at least the next three years.

Although Apple's custom 5G modem is said to offer minimal improvement to user experience and might even perform worse than Qualcomm's solution, the company remains committed to gradually phasing out its reliance on Qualcomm. This signifies that Apple has set its sights on ultimately achieving complete ownership of its 5G technology.

Despite this, Qualcomm's technological advantage in the 5G modem space and its strong partnership with Apple suggest that it will continue to play a critical role in Apple's supply chain for years to come. Qualcomm will continue to benefit from iPhone 16 sales and is poised to lead market development with its leading position in 5G technology.