The Six Five team discusses another day, another Apple booting Qualcomm rumor.
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Transcript:
Daniel Newman: This one’s a good one, Pat. I tweeted something about it. I couldn’t help myself. I saw. I think another big rumor busted out this week. Came out on Apple Insider, CNET. One of the big Apple Insider rumor starters said, “It’s happening. It’s final. Qualcomm is out at Apple. Apple’s done it. They’ve built the most incredible 5G RF system, and you’re going to see it in their next generation of phone. Farewell Cristiano, Akash, team.” What do you think, Pat?
Patrick Moorhead: I was going to wonder if you were taking my topic here.
Daniel Newman: No. I don’t ever do that. I’m only-
Patrick Moorhead: Listen, listen this is the fifth rumor I think of Apple taking out Qualcomm. If you recall, Apple tried to put Qualcomm out of business by not paying them for their intellectual property. They had pulled in Intel as their modem provider for 4G LTE modems, and the chaos that ensued. When you don’t pay a company like Qualcomm, and you’re trying to drive them out of business like Apple tries to do with its suppliers, it’s very hard on a company. They had to do layoffs. Their stock crumbled. They had to get out of markets like the data center. It was total chaos. And then once it gets to court, I think it was the second day of the trial, and I think it was San Diego, some real damning evidence came out about Apple literally, and its strategy to destroy Qualcomm. A day later, Qualcomm, and Apple wants to settle with Qualcomm. They do a multi-year licensing agreement, and a technology agreement. They recognize that Intel was not ready with their 5G modems, and Intel decides to get out of that market. And I think maybe Intel decided to sell that maybe a week beforehand, but they were all very similar.
And then it seems like every year. By the way, this is 2019 that Apple bought Intel’s assets for their modem. And every year, “It’s coming. It’s coming. Qualcomm’s toast, toast,” and then they do an IP agreement, and then they do another modem agreement. And I think, by the way, every successive year that Apple fails to get out of modem, their chances likely go up in the ability to pull it off. The hard part that Apple’s having, from what I’m hearing from thank you Apple employees, is the integration of the IP into the SOC, right? Apple uses what’s called a thin modem. It’s not integrated into the SOC. It’s a separate chip, but integrating that under the SOC, and getting the power right, and how to get work effectively. By the way, Intel never figured out how to do that either. They couldn’t pull it off either. Only Qualcomm and I think MediaTek has been able to do this. So net net, another day, another rumor. My guess is by the way, remember I used to be a supplier to Apple. Every time big negotiations come up, Apple will leak a rumor, typically, there are supply chain folks like this to get the supplier to lower their prices. Anyways, Qualcomm hit on the stock price. These silly gullible investors, we’ll see.
Daniel Newman: They are silly, and they are gullible, and they don’t see the big picture. And there’s a few different forces at play, and we’ll talk about this next week when Qualcomm reports. But of course, TSMC raising prices is another rumor that’s floating out there. And that rumor of those price increases are certainly going to hit bottom lines, and forecast guidances of all the companies that potentially have big. This is the reason that it’s a problem that we’re so dependent on TSMC. There is no competition right now. You talk about NVIDIA not having a natural predator, neither just TSMC. Now Intel’s doing its damnedest. Samsung has, what’s that?
Patrick Moorhead: I love that, natural predator.
Daniel Newman: I know. I know.
Patrick Moorhead: Did you create that-
Daniel Newman: I did. By the way, in fairness, I actually was quoted in Fortune talking about that a while ago. And I’ve used it on TV a bunch of times. It’s my little thing. There’s no natural predator, and we actually need it in the market. We need competition to drive it. But that’s a sidebar from the Apple rumor. Here’s the thing I’ll say is everybody, including Qualcomm knows Apple will do this. It’s not never. It’s just when, and if it’s real, and it’s all nonsense, because Apple has been saying it. Qualcomm’s already been readjusting and diversifying its business for the expectation. Apple’s not a big moneymaker, or a big dependency anymore. And if you actually hear, it’s low single digit impact on the company, and frankly, to some extent, and I know this is cynical of me to say Pat, but when they finally are done, really done, you know that part in the meetings we’re talking about where you look at some of your customers, and you’re like, “… them.” Honestly, and I can’t believe I said that on the record, but where all they do is soak you, that relationship is not symmetrical. It’s of course great to say, “I’m a supplier to Apple,” but all they’ve tried to do is destroy Qualcomm for the better part of 10 years now.
Patrick Moorhead: I know. It’s crazy.
Daniel Newman: And what I’m saying is this is not a partnership. This is not symmetrical. This is one of convenience, and it’s good for both companies, and the size of the relationship’s big enough that I understand why Cristiano does it. And the technology is good enough that I understand why Tim does it. But at some point, you just have to recognize where your time goes. And I think when they get that time back, and they get those resources back, there’s a good chance they could put it towards something more valuable. They could actually end up driving company growth elsewhere.
Patrick Moorhead: Yeah. Qualcomm if Apple thinks they can do it, they will destroy you. Hey. Can I put an adder on this? Do you mind?
Daniel Newman: Yeah. I’m sorry if I by the way, added. I think I’ve said “COVID, conspiracy theory,” and “…” on this podcast. This one may get no views. I’m just being candid. We may be censored like crazy, but I don’t know. I just want everyone out there, I want them to get to know me.
Patrick Moorhead: Fine. … it. I don’t care. Let’s move forward.
Daniel Newman: All right. What’s your adder? What’s your adder?
Patrick Moorhead: So IEC came out with some interesting information, and for the first time in I think four years, Apple was booted out of the top five in China, and oh, the top six.
Daniel Newman: No. I think they’re six. I was telling you. I think they’re six now.
Patrick Moorhead: Yeah, booted. Booted out of the top five, which would make them number six. Thanks Dan.
Daniel Newman: I was just helping, math.
Patrick Moorhead: No. I appreciate that. And by the way, I think this is a positive sign for Qualcomm, and you might say, “Well wait a second. Aren’t Qualcomm modems and some RF inside of Apple?” Yes. But on a per unit basis, they make more on the SOC and the mode, which includes the digital part of the modem, and then RF. They made a lot. They make a lot more profit dollars on that, and ASPs went up. And if ASPs goes up, that means that there’s going to be more Qualcomm, versus let’s say a MediaTek. So we’re going to have to wait for the Qualcomm earnings report, but I think could be a very positive sign for Qualcomm. We’ll have to balance that against costs going up for TSMC, right?
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
