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Specialty tech stock Qualcomm (QCOM -0.63%) didn’t have such a special start to the trading week. The company’s share price slipped by nearly 1%, on a disquieting media report that an important customer will part ways with it in the near future.
Apparently, that customer is none other than Apple (AAPL 0.41%). On Monday, Bloomberg reported that Apple will replace third-party components in its iPhones and iPads with its own goods. Citing “people familiar with the matter,” the financial news agency wrote that one of the components will be Qualcomm’s cellular modem chip, a key piece that allows for the devices to function as telephones. Apple will reportedly swap that out with a proprietary modem by the end of next year, or in early 2025.
Such a move would directly and profoundly impact Qualcomm, since the company derived 22% of its yearly income from the iPhone maker.
At least it has company. Apple’s push for more in-house components will see it drop Broadcom as a key supplier. That company produces a component that powers both WiFi and Bluetooth functionalities on iDevices.
Neither Apple nor Qualcomm has yet officially commented on the Bloomberg report.
Qualcomm’s stock would have taken a much more powerful hit if the news was unexpected. But realizing that Apple’s long-term ambitions were to bring its component design and deployment in-house, the chipmaker has warned for years that the business relationship would fade.
The loss of Apple’s business will certainly be felt in Qualcomm’s fundamentals, however investors have been well prepared for this for quite some time.
Eric Volkman has positions in Apple. The Motley Fool has positions in and recommends Apple and Qualcomm. The Motley Fool recommends Broadcom and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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