Apple may ditch Qualcomm chips, report says

SAN DIEGO — Apple is considering dumping Qualcomm’s cellular modem chips from next year’s versions of iPhones and iPads, the Wall Street Journal reported, citing unidentified sources.

According to the sources, Apple is designing devices to exclude Qualcomm chips that link smartphones to cellular networks as the two tech giants battle over Qualcomm’s patent royalties.

The Journal said Apple could use Intel or MediaTek chips in devices that probably would be introduced in late 2018.

According to analysts, Apple typically makes component supply decisions for the next iPhone version nine months or so ahead of time, though that’s not always the case.

Apple and Qualcomm are locked in a court battle over Qualcomm’s patent licensing.

Apple, which has stopped paying Qualcomm for use of its intellectual property during the dispute, contends that charging royalties based on a percentage of the total device price means Qualcomm gets paid for inventions it had nothing to do with.

Qualcomm counters that cellular technology — particularly high-speed wireless Internet access — is what makes smartphones smart. Analysts estimate that Apple was paying roughly $10 per iPhone in royalties for use of Qualcomm’s cellular patents.

Qualcomm sells chips used in smartphones — including modems that link smartphones to cellular towers — and it licenses its patents to device makers.

Qualcomm has been supplying modem chips to Apple since 2011. It was the only supplier until last year, when Apple began using Intel modems in roughly half its iPhone 7 models.

The Wall Street Journal said Qualcomm withheld testing software from Apple for iPhone and iPad prototypes, so Apple began designing devices without Qualcomm modems.

Qualcomm said Tuesday that “the Qualcomm modem that could be used in the next generation iPhone has already been fully tested and released to Apple. We are committed to supporting Apple’s new devices consistent with our support of all others in the industry.”

Stacy Rasgon, an analyst with Bernstein Research, estimated in a research note that Qualcomm’s modem sales to Apple range from $1.5 billion to $2 billion a year — roughly 10 percent of annual revenue.

“While we are unsure either party really wants to go in front of a jury,” he wrote, “we certainly don’t see Apple with any real incentive to settle (the patent case) anytime soon.”

Rasgon noted that Intel modems don’t support a 3G technology called coded-division multiple access, which is required by Verizon, Sprint, Chinese wireless network operators and others.

Intel is expected to support that technology in its modem chips next year.

Qualcomm’s modems that power Samsung, Sony and other Android smartphones can deliver peak download speeds of 1 gigabit per second.

Intel’s delivers peak speeds of 600 megabits per second.