Apple Starts Work on Its Own Cellular Modem, Chip Chief Johny Srouji Says

Apple has started building its own cellular modem for future devices, a move that would replace components from Qualcomm, Apple's top chip executive told staff on Thursday.

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 percent 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 (roughly Rs. 7,400 crores) acquisition of Intel 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 iPhone models 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 percent of its revenue from Apple, while Intel gets roughly 7 percent 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.

© 2020 Bloomberg LP

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