Apple wants to develop its own 5G baseband chip to reduce its reliance on Qualcomm. However, the release of the iPhone 15 series flagship phones has also made the market realize that Apple is still facing difficulties in developing its own 5G baseband chip.
On September 13th, Apple announced at a press conference that the iPhone 15 Pro and 15 Pro Max are equipped with the A17 Pro chip, which is the industry's first commercially available 3nm process chip. However, there was no progress in the 5G baseband chip.
Just two days ago, on the evening of September 11th, Qualcomm announced that it has reached an agreement with Apple to provide Snapdragon 5G modems (baseband) and RF systems for Apple's smartphones to be launched from 2024 to 2026. This means that Apple's self-developed baseband chip road is not smooth, and it will still rely on Qualcomm for the next three years.
According to media reports citing insiders, Apple tested its self-developed 5G baseband chip at the end of last year, but it was three years behind Qualcomm. This will result in the iPhone's network speed being unable to compete with its competitors. Therefore, Apple abandoned the idea of using this chip in the 2023 models and postponed its release to 2024. However, they later realized that this goal could not be achieved.
Some media reports citing insiders' opinions point out that Apple's failure in developing the 5G baseband chip is their own fault. Technical challenges, poor communication, and differences of opinion among responsible parties on whether to develop the 5G baseband chip internally have led to slow progress in chip research:
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At the same time, the teams in the United States and overseas are fighting separately without a global leader to coordinate the overall situation. Some chip development managers in certain countries prevent engineers from disclosing bad news about delays in the chip development process, which has led to repeated postponement of the set deadlines.
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Investors have always hoped that Apple can reduce costs by developing internal chips to offset the impact of weak demand in the smartphone market. According to statistics, Apple paid over $7.2 billion in patent fees to Qualcomm in 2022. However, developing baseband chips is relatively difficult due to the need to be compatible with previous generation communication technologies and the comprehensive patent layout.
As Jaydeep Ranade, former Director of Mobile Business at Apple, said, it is naive to think that just because Apple manufactures the best chips, they can also manufacture baseband chips.
<h2>Setbacks in self-developed modem chips</h2>
In order to reduce reliance on Qualcomm, Apple introduced Intel starting from the iPhone 7 series in 2016. In 2018, Apple CEO Tim Cook issued the order to design and manufacture modem chips and hired thousands of engineers to reduce dependence on Qualcomm.
At the end of July 2019, Apple announced the acquisition of Intel's smartphone modem and baseband chip division, with plans to develop its own 5G modem and baseband chip.
Procuring Qualcomm chip products while secretly developing alternatives internally has become Apple's classic &#34;two-pronged&#34; strategy and part of Cook's supply chain management approach. However, Apple's progress in developing its own 5G baseband chip did not meet expectations, and the iPhone baseband and RF chips still face difficulties caused by Qualcomm.
According to former Apple engineers and executives, the company originally planned to use its self-developed modem chips in the latest iPhone models. However, tests conducted at the end of last year revealed that the chips were too slow, prone to overheating, and had a circuit board size that occupied half of the iPhone's area, making them unusable.
Apple has always believed that it can replicate the success of its microprocessor chips designed for the iPhone. However, it later discovered that the development threshold for baseband chips is extremely high in terms of technical requirements. The difficulty of baseband chip development involves many aspects, including patent issues, power consumption, speed, cost balance, and even new technical requirements such as satellite communication.
The main challenges can be viewed from two perspectives: verticality and width. Vertically, baseband chips not only need to support 5G but also be backward compatible with all mainstream standards of 4G, 3G, and 2G. In terms of width, baseband chips need to support global network standards, meet the network requirements of different operators worldwide, and undergo comprehensive field testing. Most of the smartphone baseband chip suppliers in the market today have been accumulating technology and patents since the 2G era.
<h2>Apple Urgently Needs to Break Free from Qualcomm</h2>
The patent dispute between Apple and Qualcomm is not a new topic. According to the Qualcomm agreement, for every iPhone device sold, Qualcomm deducts 5% from the selling price as a patent licensing fee, also known as the &#34;Qualcomm tax&#34; in the market.
As the price of Apple's iPhones continues to rise, the patent licensing fee charged by Qualcomm has also increased from $7.5 per device to $12-20 per device. In 2022, Apple paid Qualcomm approximately $9 billion in &#34;Qualcomm tax,&#34; accounting for about one-fifth of Qualcomm's revenue.
In the past two years, Qualcomm's patent licensing model has made Apple increasingly dissatisfied, and the dispute between the two companies has continued to escalate.
In 2019, the conflict between the two parties reached its peak. On the one hand, Qualcomm accused Apple of infringing its patents by withholding patent fees, claiming that Apple deceived regulatory agencies around the world and stole software to help other chip manufacturers. Apple, on the other hand, emphasized that Qualcomm is a monopoly enterprise that has been charging excessive patent fees for many years. Cook internally referred to Qualcomm's royalty model as completely wrong.
However, in the end, the two parties reached a settlement. In April 2019, Apple announced a 6-year licensing agreement with Qualcomm, and until 2024, Apple will continue to purchase 5G baseband chips from Qualcomm.
In November 2021, Qualcomm estimated at an investor conference that by 2023, Apple's purchases of baseband chips from Qualcomm would decrease to 20% of its demand. Qualcomm had previously assessed that Apple would start using its own internally developed 5G baseband chips from 2024.
The market once speculated that Apple could switch to self-developed baseband chips as early as 2024. However, with the extension of the three-year contract between Qualcomm and Apple, Qualcomm will continue to supply baseband chips to the iPhone until 2026, making Apple's path to self-development a long one.

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Apple's self-developed 5G baseband chip has been repeatedly hindered by internal issues, resulting in slow speed and overheating, lagging behind Qualcomm by 3 years.

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