Apple Inc (NASDAQ:AAPL). has reportedly ceased development on its internal “Sinope” project, which was initiated in 2019 with the goal of creating an in-house 5G modem for the upcoming iPhone SE 4. This decision solidifies Qualcomm (NASDAQ:QCOM)’s role as the exclusive supplier of 5G modems for Apple’s iPhones, a position they will maintain due to the project’s termination.
The tech giant had acquired Intel (NASDAQ:INTC)’s modem business with ambitions to produce its own modems, aiming to launch with the iPhone SE 4. However, the project has faced continuous delays. Initially expected to release in 2023, the completion date for the in-house modem has now been pushed back to at least 2026. This delay is a significant shift from Apple’s original plan to phase out Qualcomm chips by 2025.
The intention behind developing an internal modem was to reduce costs and enhance the efficiency of Apple’s devices, including iPhones, iPads, and Apple Watches. Apple’s strategic move to develop its own technology was seen as a way to gain more control over the manufacturing process and reduce reliance on third-party suppliers.
The halt in development indicates a reassessment of Apple’s investment strategy in the face of these persistent setbacks. For the foreseeable future, Qualcomm will continue to supply Snapdragon modems for Apple’s suite of products until Apple can achieve its goal of integrating its own modem technology.
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In light of Apple Inc.’s recent decision to halt its in-house 5G modem project, the “Sinope,” and Qualcomm’s reinforced position as the exclusive supplier of 5G modems for Apple’s iPhones, investors might find the following insights from InvestingPro particularly relevant:
InvestingPro Data shows that Apple has a market capitalization of $2.94 trillion and a P/E ratio of 30.76, with a slight revenue decline of -2.8% over the last twelve months as of Q4 2023. Despite this, the company’s gross profit margin remains strong at 44.13%. Meanwhile, Qualcomm, with its market cap of $143.17 billion, shows a more attractive P/E ratio of 19.89 and a notable dividend yield of 2.5%, indicating a healthier payout to investors.
InvestingPro Tips for Apple emphasize the company’s high earnings quality, with free cash flow exceeding net income, and its ability to yield high returns on invested capital. It’s noteworthy that Apple has raised its dividend for 12 consecutive years, underscoring its financial stability and commitment to shareholders. However, analysts have also revised their earnings expectations downwards for the upcoming period, suggesting caution.
For Qualcomm, InvestingPro Tips highlight the company’s similar strengths in yielding high returns on invested capital and raising its dividend for 21 consecutive years. Additionally, 16 analysts have revised their earnings upwards for the upcoming period, portraying a positive outlook for Qualcomm’s financial performance.
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These metrics and tips are crucial for investors considering the impact of Apple’s strategic decisions on both companies. With InvestingPro’s subscription now on a special Cyber Monday sale with a discount of up to 55%, and an additional 10% off a 2-year InvestingPro+ subscription using the coupon code sfy23, investors can access even more insights. There are 22 additional InvestingPro Tips for Apple and 14 for Qualcomm, offering a comprehensive view of these tech giants’ financial health and market position.
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