This Company’s Semiconductors Are Essential for Making iPhones

[Asia Economy Reporter Baek Jong-min] Apple has consecutively introduced self-developed semiconductors for smartphones, tablet PCs, wireless earphones, and personal computers (PCs). It is now difficult to find a company in the semiconductor industry that is not influenced by Apple. From comprehensive semiconductor companies to foundries and fabless companies, all are watching Apple closely. They must be alert to whether Apple will enter the semiconductor sectors they produce, while fierce competition takes place to secure orders from Apple. Depending on Apple's choices, the performance and stock prices of competing companies often show erratic movements. Amid this turmoil, a company that stands up to Apple draws attention. That protagonist is Qualcomm, a fabless company specializing in communication semiconductors. Qualcomm's achievements could serve as an answer to counter Apple Silicon.

Qualcomm's Snapdragon AP

Qualcomm recently surprised the semiconductor industry with an unexpected statement while announcing its third-quarter results. Qualcomm forecasted that the supply of 5G communication modem chips to Apple next year will remain at this year's level. This was a surprising remark. Initially, the market expected Apple to reduce the proportion of Qualcomm models used next year to 20%. Qualcomm also anticipated this in the past. At an IR event held in New York last November, Apple predicted that by 2023, the share of Qualcomm modem chips used would shrink to 20%. The reporter heard that statement firsthand. However, the situation reversed a year later. Apple-specialized media 9to5Mac predicted that Apple would not be able to use its self-developed modems until 2024. It is expected that Qualcomm components will be used not only in the iPhone 15 but also in the iPhone 16.

Qualcomm is a thorn in Apple's side. Qualcomm holds the original technology for Code Division Multiple Access (CDMA) wireless communication. When Korea adopted the CDMA method, Qualcomm rose from a small company to a global semiconductor giant. Qualcomm dominated the communication semiconductor market by leveraging its patents. Korean as well as Chinese mobile phone manufacturers were dependent on Qualcomm. Recently, Qualcomm has maintained superiority in its ongoing battle with Apple.

Qualcomm demanded patent royalties every time an iPhone was sold, just as Korean mobile phone manufacturers had experienced in the past. Apple drew its sword: a patent lawsuit. The patent litigation between Apple and Qualcomm reached about 30 trillion won, earning the title of the "patent war of the century." However, Apple ended the patent war abruptly in 2019. Competing with Samsung Electronics was difficult without Qualcomm's 5G modem chips. Then, in 2020, Apple released the iPhone 12, its first 5G-supported iPhone. The iPhone 12 became the top contributor to Apple's performance during the COVID-19 pandemic.

Of course, Apple did not remain idle. Apple made a decisive move by acquiring Intel's modem business unit, which had supplied modems to Apple. Apple also secured Intel's patents and personnel intact. There was a strong expectation that Apple would soon become independent in modem chips following its success with APs. Apple's dilemma is similar to Samsung Electronics' situation. Just as Samsung's Exynos AP struggles with heat dissipation, Apple's 5G modem chip reportedly has not resolved heat issues. Rumors abound that Samsung will use Qualcomm's Snapdragon 8 Gen 2, to be released this month, instead of its own Exynos chip in the Galaxy S23 smartphone launching next year. Both Apple and Samsung, lacking alternatives, have no choice but to rely on Qualcomm.

[Image source=Reuters Yonhap News]

On the contrary, Qualcomm is also targeting Apple's core. Early last year, Qualcomm made a surprise acquisition of Nuvia, founded by former designers of Apple's A-series APs. Through this, Qualcomm aims not only to strengthen its own AP, Snapdragon, but also to expand its lineup to CPUs for laptops and servers. Qualcomm has announced the release of a Snapdragon for PCs next year. The plan is to replicate the upheaval Apple caused in the laptop sector with its M1 and M2 chips, which were designed in-house after excluding Intel. This is a bold strategy that even considers Intel, a specialist in PC and server CPUs. Cristiano Amon, Qualcomm's CEO, has already expressed confidence that Qualcomm can release a CPU surpassing Apple's M1. He also hinted that laptops using Qualcomm CPUs will appear in earnest starting in 2024.

There is no guarantee that Qualcomm's claims will become reality. Qualcomm is also a company directly hit by the recent contraction of the mobile device market. However, the secret to Qualcomm's ability to compete against Apple, whose market capitalization reaches $2.34 trillion compared to Qualcomm's mere $135.2 billion, lies in its continuous improvement of communication patents and semiconductor technology.

This content was produced with the assistance of AI translation services.