Apple Inc has started building its own cellular modem for future devices, a move that would replace components from Qualcomm Inc, Apple’s top chip executive told staff.
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 4.4% in New York.
“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 acquisition of Intel Corp’s 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 iPhones 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.
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 towards greater reliance on its own parts at the expense of Qualcomm, Intel and others. Qualcomm gets about 11% of its revenue from Apple, while Intel gets roughly 7% of sales from the iPhonemaker, 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.
‘Apple ignored breaches of China labour law’
Apple Inc ignored breaches of China’s temporary worker law in its supply chain for years because it was concerned about increased costs and product launch delays, The Information reported.
Foxconn, Pegatron, and Quanta Computer, three of Apple’s major assembly partners, faced difficulties complying with the law between 2013 and 2018, The Information said.
The rule states that only 10% of a workforce can be temporary. Last year, Bloomberg reported that Foxconn violated this for the production of the iPhone 11.
In 2014, more than half of a surveyed 362 suppliers broke the temporary worker law, and in March 2015, 81 of 184 Apple suppliers topped the 10% threshold, according to The Information. That continued in parts of 2016, 2017 and 2018, the website said. In 2014, Apple gave suppliers two years to mitigate the issues, but by 2016 little progress had been made, The Information reported.
Apple executives knew that its production strategy increased demand for temporary staff, known as dispatch workers, The Information reported. After Apple commissioned a two-year study with Pegatron, Apple researchers recommended raising salaries, building better dorms, reducing the use of dispatch workers and not hiring workers younger than 23 years old. However, three ex-Apple employees said senior Apple executives were reluctant to push Pegatron to make changes as they wanted to let supply and demand determine China’s labour market conditions, The Information reported.