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Qualcomm Slips on Apple's Plans to Make Its Own Modems

Qualcomm shares fall after tech giant Apple says it has started the transition to building its first cellular modem to be used in future devices.

Shares of chipmaker Qualcomm  (QCOM) - Get Qualcomm Inc Report slipped on Friday after tech giant Apple  (AAPL) - Get Apple Inc. Report said it had started the transition to building its first cellular modem to be used in future devices.

The stock of the San Diego company at last check traded at $144.67, down 7.1%. Shares of Apple, Cupertino, Calif., were down 1.3% to $121.68.

Modems enable internet connectivity in cellphones and laptops.

Apple's latest iPhones with 5G use parts from Qualcomm, which is better known for its smartphone processors and modems.

On Thursday, Apple said its $1 billion acquisition of Intel's  (INTC) - Get Intel Corporation Report modem business in 2019 helped the iPhone maker build a team of hardware and software engineers to develop its own cellular modems.

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"This year, we kicked off the development of our first internal cellular modem, which will enable another key strategic transition,” Apple's senior vice president of hardware technologies, Johny Srouji, said. 

“Long-term strategic investments like these are a critical part of enabling our products and making sure we have a rich pipeline of innovative technologies for our future.”

Apple did not specify when the cellular modem would be ready to ship in products, but a 2019 patent agreement between Apple and Qualcomm includes a six-year licensing pact, Bloomberg reported.

Apple also plans to introduce its latest series of microchips, which it designed in-house, as early as spring 2021, media reports suggested earlier this week.

The chips will outpace the performance of the latest machines running on Intel's hardware, Bloomberg reported.

This new chip would succeed the M1. Apple's M1 chip for its Mac lineup was unveiled in November with promises of improved power and improvements to its next generation MacBook Air, Mac mini and MacBook Pro products.