Apple reveals first custom modem chip, shifting away from Qualcomm

By Stephen Nellis

SUNNYVALE, California (Reuters) - Apple on Wednesday revealed its first custom-designed modem chip that will help connect iPhones to wireless data networks, a move that will make the company less reliant on chips from Qualcomm that also power its Android rivals.

The chip will be at the heart of Apple's $599 iPhone 16e unveiled on Wednesday. Apple executives told Reuters these chips will roll out across all of its products in the coming years but did not give details on the timing.

The chips are part of a new collection of components Apple calls the C1 subsystem. A subsystem houses key components like processors and memory.

The iPhone 16e, which will feature the same A18 processor chip as the rest of its iPhone 16 lineup, has the best battery life of any of its 6.1-inch phones thanks to the C1 system, Apple's Kaiann Drance, vice president of iPhone product marketing, told Reuters. The iPhone 16e will also have Apple's latest artificial intelligence features, Drance said.

Modem chips are hard to make because they must be compatible with hundreds of carriers in scores of countries. Only a handful of companies around the world including Samsung Electronics, MediaTek and Huawei Technologies, have successfully created one.

For years, Apple sourced modems from Qualcomm, the world's biggest supplier of the chips. Qualcomm chips also power Android gadgets and Windows laptops that compete with Apple's devices.

Apple fought a protracted legal battle with Qualcomm but ultimately settled and signed new supply agreements with it in 2019 after alternative suppliers such as Intel failed to deliver a viable alternative.

But Apple is now confident it has created an advanced chip that will form the basis of a modem platform Apple will use for years to come.

NEW PLATFORM WITH GLOBAL COMPATIBILITY

The C1 subsystem is the most complex technology Apple has ever built, with a baseband modem manufactured with advanced 4-nanometer chipmaking technology and a transceiver made with 7-nanometer technology, Johny Srouji, Apple's senior vice president of hardware technologies, said in an interview at one of Apple's silicon labs in Sunnyvale, California.

The chips had to be tested with 180 carriers in 55 countries to ensure they will work in all the places Apple ships iPhones.

"We build a platform for generations," Srouji said. "C1 is the start, and we're going to keep improving that technology each generation, so that it becomes a platform for us that will be used to truly differentiate this technology for our products."

One of the way Apple hopes the C1 will set its iPhones apart is by tightly integrating it with its processor chips.

For example, if an iPhone encounters congested data networks, the phone's processor can signal to the modem which traffic is the most time sensitive and put it ahead of other data transfers, making the phone feel more responsive to the user's needs, said Arun Mathias, vice president for wireless software at Apple.

The C1 chips also have custom GPS systems and satellite connectivity for when iPhone users are away from mobile data networks. But they will lack some features, such as the ability to connect to what are known as millimeter wave 5G networks.

Millimeter-wave technology is one of Qualcomm's strongholds. Apple executives declined to say when the company's chips will have the technology or how quickly Apple will phase out Qualcomm's chips.

Qualcomm executives have told investors they expect their share of Apple modems to drop from its current 100% to as low as 20% by next year, though Qualcomm still has a technology licensing agreement in place with Apple until at least 2027.

Apple's Srouji said that the company's goal was not to match the specifications of its chip rivals but instead to design products specific to the needs of Apple products.

"We're not the merchant vendor to go compete with Qualcomm and MediaTek and others. I believe we're building something truly differentiating that our customer will benefit from," he said.

(Reporting by Stephen Nellis in Sunnyvale, California; Editing by Sonali Paul)