Despite the conclusion of the war between Apple and Qualcomm last week, it appears that Apple still plans to remain true to its usual strategy of avoiding single-source suppliers, with a new analyst report suggesting that the 5G modem chips for the 2020 iPhone lineup will come from not only from Qualcomm, but also from an unlikely new supplier: Samsung.
Apple and Qualcomm settled their torturous multi-year patent dispute last week, with Apple basically raising the white flag of surrender — giving away almost $6 billion in payments and agreeing to an even higher per-iPhone licensing fee than before. The move was almost certainly a bitter pill to swallow for Apple, which had been fighting Qualcomm more on principles than financial reasons. However, once Apple realized that it’s key supplier, Intel, was giving up on 5G modems entirely, after having spent the past year failing to produce a reliable chip, it’s clear Apple had no choice to settle if it wants to have a 5G iPhone out any time in the next two to three years.
The settlement is also undoubtedly antithetical to Apple’s — and Tim Cook’s — principles, not only in terms of being beholden to Qualcomm’s exorbitant licensing fees, but also simply having to rely on any external supplier for the success of its flagship smartphone. Apple has always prefer to own all of the key components in its supply chain, which is why most of its other main chips have been designed in-house for years. Cracking modem chips, however, is another matter entirely, and most analysts suggests that Apple is years away from having its own 5G modem.
However, it’s clear Apple hasn’t given up on its principles entirely. The truce with Qualcomm — and we have no doubt it’s a temporary armistice at best until Apple can get its own chips ready — will allow Apple to gain access to a supply of leading-edge modem chips for a 5G iPhone, but Apple isn’t about to keep all of its eggs in one basket, and has turned to Samsung to supply 5G modem chips as well.
Reputable analyst Ming-Chi Kuo has added his voice to confirmations that Apple will indeed release a 5G iPhone next year, but adds that Apple’s six-year licensing deal with Qualcomm is non-exclusive, and that the company is expected to also purchase 5G modem chips from Samsung in order to lower its supply risk, reduce costs, and also improve its bargaining power. While this has not been confirmed, the move is so typical of Apple’s supply chain strategy that it seems extremely likely.
Kuo notes that Apple will likely use the chips for different markets, with the Qualcomm chips being used for “mmWave markets” and the Samsung for “Sub-6Ghz markets.” If this is true, however, it means that 5G iPhones sold in the U.S. on AT&T, T-Mobile, and Sprint are actually likely to use Samsung 5G modem chips, while only the models from Verizon — the only carrier that plans to roll out mmWave nationwide — will get the Qualcomm chips.
These different 5G technologies would render the phones incompatible with each other’s networks, similar to the issues we saw with LTE bands when the iPhone 5 came out years ago, so there would be no direct performance comparisons between Qualcomm and Samsung chips at the 5G level. However, since the same modem chips would also be used for 4G/LTE and even 3G support, we could end up seeing the same performance differences that were observed when Apple offered a mix of Qualcomm- and Intel-equipped iPhones back in 2017. In other words, if Qualcomm’s 5G modem chips perform better on LTE networks than Samsung’s, then users of the Verizon iPhone model will reap the benefits of the faster chips even without being on a 5G network.
Kuo also adds that he expects the adoption of 5G to boost Apple’s iPhone sales in 2020, with a forecast of 195–200 million units next year. By comparison, Kuo has predicted sales of 188-192 million in 2019.