Johny Srouji, Apple’s senior vice president of hardware
technologies, made the disclosure in a town hall meeting with Apple employees,
according to people familiar with the comments. Qualcomm shares dropped as much
as 6.3% in extended trading.
“This year, we kicked off the development of our first
internal cellular modem which will enable another key strategic transition,” he
said. “Long-term strategic investments like these are a critical part of
enabling our products and making sure we have a rich pipeline of innovative
technologies for our future.”
A cellular modem is one of the most important parts of a
smartphone, enabling phone calls and connection to the internet via cellular
networks.
Srouji said the $1 billion acquisition of Intel Corp.’s
modem business in 2019 helped Apple build a team of hardware and software
engineers to develop its own cellular modem. He said the modem is one of a few
wireless chips the company designs, including the W-series in the Apple Watch
and the U1 ultrawide-band chip in the iPhone for precise location information.
The latest iPhones with 5G use parts from Qualcomm. Before
that, Apple used Intel parts for a few years and then purchased that business
unit from the chipmaker.
Srouji did not say when the cellular modem would be ready to
ship in products, but a 2019 patent agreement between Apple and Qualcomm
includes a six-year licensing pact. Qualcomm charges license fees to phone
makers based on wireless patents it owns, regardless of whether they use its
chips or not.
In the meeting with employees, Srouji also highlighted
Apple’s other work on chips, including the new M1 processors in the latest
MacBook Air, MacBook Pro and Mac mini. Apple is working on a “family” of Mac
chips, Srouji said. Apple is planning upgrades that are designed to improve on
Intel’s fastest computer chips, Bloomberg News reported earlier this week.
Apple has been hiring engineers from Qualcomm for years to
help it build the modem, and has offices focused on the effort in San Diego, at
its Cupertino, California headquarters and in Europe.
The move extends Apple’s push toward greater reliance on its
own parts at the expense of Qualcomm, Intel and others. Qualcomm gets about 11%
of its revenue from Apple, while Intel gets roughly 7% of sales from the iPhone
maker, according to data compiled by Bloomberg.
Apple started shipping its own chips in 2010 with the A4
main processor in the iPhone 4 and original iPad. Since then, Apple has
expanded this work to custom camera processors, chips to handle artificial
intelligence tasks and collect motion data, along with chips for Apple Watches,
Apple TVs and headphones.
The Mac processors are some of Apple’s most ambitious chip
designs to date. Cellular modem development is also challenging.-Bloomberg
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