Qualcomm's 5G Chip Deal With Apple: Stock Reversal In Sight?

Just when investors thought they'd parted ways, Qualcomm Inc. QCOM and Apple Inc. AAPL have surprised everyone, joining forces in a three-year deal over 5G chips.

Apple’s pivot back to Qualcomm seems to be a clear indicator that its quest to whip up its own 5G chips might not be going as swimmingly as hoped, as the Wall Street Journal reported Monday.

Diving Into The Numbers

Historically, this relationship has been a goldmine for Qualcomm and, well, a bit of a money pit for Apple. Last year, Apple’s modem buys accounted for 16% of Qualcomm's earnings – that’s $7.26 billion.

Despite these riches, Qualcomm's shares have taken a nosedive, down 20% this past year, thanks to a general cooling towards smartphones. The terms of this new deal, however, are being played close to the vest.

Qualcomm Inc. shares were up 3.6% during early trading on Monday, according to Benzinga Pro.

QUALCOMM Inc. Daily Chart

Read also: Qualcomm Stock Analyst Ratings, Price Targets, Predictions

Apple Gives In On 5G Chip Efforts?

So, why is Apple revisiting an old partner? In 2019, Apple made a hefty $1 billion acquisition of Intel’s smartphone-modem enterprise, assimilating over 2,200 personnel and a vast patent treasury. Yet, Intel’s tribulations in perfecting 5G modems – that led them to hemorrhage approximately $1 billion annually – might be indicative of the challenges Apple is grappling with.

But, like Intel before them who bled a billion annually on 5G struggles, Apple seems to be finding the 5G scene tougher than expected.

Curiously, this partnership renewal has been announced just as Apple is about to pull the curtain on its newest products this week – the iPhone 15, not to mention fresh-from-the-oven Apple Watches and AirPods. With sales having hit a bit of a rough patch recently, these launches are crucial. And let's not forget, the iPhone remains Apple's golden goose, raking in roughly half of their total revenue.

Read now: Will iPhone 15 Be A Meaningful Upgrade? KeyBanc Analyst Weighs In On Main Features, Carrier Deals

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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