Apple rumoured to be ditching Qualcomm chips

A couple of months back we wondered when would be the breaking point in the Apple/Qualcomm relationship, and now reports are emerging that time is now.

It should be noted that these reports are guesswork from analysts as opposed to internal sources, though the rumours have been enough to send the Qualcomm stock price downwards. Nomura Instinet has predicted Apple will be dropping Qualcomm from its supply chain for 2018 in favour of a cheaper chip from Intel. The news sent Qualcomm share price down 6.5%, though there was a bit of a recovery in overnight trading.

Considering the dodgy track record Intel has had in the mobile space, this would certainly be a boost. Nomura Instinet estimates Apple would save in the region of $100 million should it shake up its supply chain. And while it might be good news for Intel and Apple, Qualcomm would suffer in the region of $400 million should the guess prove to be accurate. Qualcomm’s latest forecast already includes this possibility.

Of course such a breakup has been on the horizon for some time. Two companies cannot continually sue each other without causing some damage to the relationship. It was always going to be a matter of time before the two parted ways, especially when the lawsuits moved from IP disputes and onto cases which would have impacted sales. When Qualcomm wrote to regulators in China and the US trying to get iPhone sales banned, we couldn’t see any way back for this relationship.

Such a development would certainly be a bit of bad news for investors, and considering the intentions of Broadcom, there might be a few who become more interested in the hostile takeover bid. Should Apple be lost as a customer, the Qualcomm business will start to look less stable. It certainly isn’t the end of the road, but it is a major loss. Qualcomm investors are after the best possible position for their money, and considering Qualcomm’s issues over the last couple of years (fines, investigations, lawsuits etc.) this might be a good time to take an offer and look elsewhere to invest.

Another twist might be a reduction in the price Broadcom is willing to pay per share. It was only over the weekend a higher offer being tabled to acquire Qualcomm was rumoured, but should Apple be lost as a customer it might well be reversed. Sources cautioned Broadcom CEO Hock Tan could change his mind and this is certainly a factor which will be taken into consideration when putting a value on a business.

Perhaps there will be a couple of panicked phone calls over the next couple of days. Nail down the $80 share price which Broadcom is considering before they decide an Appleless Qualcomm is worth much less.

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