Behind Qualcomm Truce, a Setback for Apple’s Chip Independence

A little over a decade ago, Apple shelled out $278 million to acquire a chip startup, PA Semi, providing it with the know-how to create its own chips for the iPhone and putting it on a path towards independence from outside suppliers in the chip business.

On Tuesday, though, Apple took a detour on that journey when it settled a long-running legal battle with Qualcomm over royalty payments. Among other things, Apple agreed to a “multiyear chipset supply agreement,” suggesting that Apple will once again begin sourcing a key ingredient in its iPhones—wireless modems—from Qualcomm. Qualcomm's stock shot up 23% on the news. 

Just hours after Apple and Qualcomm announced their agreement, Apple's current supplier of modems, the chip giant Intel, said it no longer plans to make smartphone modems that rely on 5G, a new generation of wireless technology. Intel had struggled to develop the modems, which left Apple with few options but to make peace with Qualcomm. Make no mistake though, the armistice is likely to be a temporary one.