Benzinga - by Rounak Jain, Benzinga Staff Writer.
Chipmaker Qualcomm Inc. (NASDAQ:QCOM) has reported that its deals with tech giants Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co Ltd. (OTCPK: SSNLF) have been extended.
What Happened: While Qualcomm's deal with Apple for modems has been extended through 2027, its deal with Samsung to provide top-tier Snapdragon chipsets for the flagship Galaxy smartphones has been extended for an unspecified period.
In a post-earnings conference call, Qualcomm underscored the importance of both the deal extensions and also stated that it has renewed long-term agreements with two "significant" Chinese smartphone manufacturers.
"Apple exercised its unilateral option to extend its global patent license agreement for an additional 2 years, taking the existing agreement through to March 2027."
Apple had entered into a six-year agreement with Qualcomm in 2019 to license its modem technology for iPhone after settling a string of lawsuits.
Qualcomm reported revenue of $9.94 billion in the December 2023 quarter, a 5% year-on-year rise.
Why It Matters: Tech analyst Ben Bajarin called it a "not surprising development."
In an also not surprising development, on the @Qualcomm call, it was mentioned:"Apple exercised its unilateral option to extend its global patent license agreement for an additional two years, taking the existing agreement through to March 2027"
— Ben Bajarin (@BenBajarin) January 31, 2024
Apple's struggles with 5G modem technology have been known for quite some time now, despite the iPhone maker acquiring Intel's modem business for $1 billion in 2019.
Apple's challenges with rolling out an in-house modem have led to multiple delays – the rollout has been reportedly pushed back to late 2025 or early 2026. We might not see an Apple modem until the iPhone 19 or 20, assuming that the company continues with the existing numbering scheme.
Apart from this, Qualcomm also highlighted the deal extension with Samsung to provide top-tier Snapdragon chipsets for flagship Galaxy phones.
"The extended agreement demonstrates the value of Snapdragon 8, our technology leadership and our successful long-term strategic partnership with Samsung."
Notably, Samsung has used flagship Qualcomm Snapdragon chipsets in all of its flagship smartphones in the U.S. since 2017. More recently, Qualcomm has also been providing the best binned Snapdragon chipsets exclusively to Samsung, with the chipsets being branded "for Galaxy."
Looking Ahead: Qualcomm's deal extensions with multiple major smartphone makers underline that fabricating a high-quality chipset and modem is difficult.
Both Samsung and Apple have been making efforts in this regard for a while now. While Samsung's foundry division has been making "Exynos" chipsets and using them in its smartphones for several years, it has retained Qualcomm's Snapdragon chipsets for its flagships.
Apple, too, has been trying to design a 5G modem for several years now – initially in partnership with Intel, but it acquired most of the chipmaker’s modem division in 2019, along with over 2,200 employees.
Price Action: Qualcomm's shares closed at $148.25 on Wednesday, as against a 52-week range of $101.47 to $157.98.
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