Qualcomm Faces Loss of Apple Business, Rated ‘Underperform’ by Bank of America

Key Takeaways

• Apple to replace Qualcomm modems by Fall 2027
• Expected $7‑$8 billion revenue loss from Apple
• Samsung and Xiaomi expanding in‑house silicon capabilities
• BofA rates Qualcomm stock ‘Underperform’
• Smartphone chip market entering maturity phase

Summary

Bank of America downgraded Qualcomm to an 'Underperform' rating, citing an imminent $7‑$8 billion revenue loss as Apple phases out Qualcomm’s modem chips by fall 2027. The analyst notes that the smartphone chip market is maturing, with rivals like Samsung and Xiaomi building in‑house silicon, further eroding Qualcomm’s market share. Qualcomm remains a leader in smartphone processors, but its modem business faces a steep decline. The report underscores broader industry shifts toward proprietary semiconductor solutions.

Pulse Analysis

Qualcomm’s reputation as the dominant supplier of 5G modem technology has long been anchored by its relationship with Apple, which accounted for a sizable portion of the chipmaker’s revenue. Bank of America’s recent downgrade to ‘Underperform’ reflects a projected $7‑$8 billion shortfall as Apple moves to its own internally designed modems, with the transition slated for completion by the fall of 2027. While Qualcomm continues to lead in smartphone processors, the impending loss of Apple’s modem business creates a material gap in its earnings profile and raises questions about the company’s ability to replace that cash flow elsewhere.

The shift away from Qualcomm is part of a wider industry trend toward vertical integration. Samsung has already trimmed Qualcomm’s share of the Galaxy lineup, opting for its Exynos processors, and Chinese manufacturer Xiaomi announced a $7 billion investment in proprietary silicon R&D. These moves compress the addressable market for third‑party modem vendors and accelerate the development of custom solutions that can bypass licensing fees. As memory prices rise and the overall handset market matures, the competitive pressure on Qualcomm’s margins intensifies.

For investors, the Apple departure underscores the need to reassess Qualcomm’s growth narrative. The company’s strong patent portfolio and expanding presence in automotive and IoT segments may offset some of the handset headwinds, but the timeline for monetizing those opportunities remains uncertain. Analysts will watch quarterly earnings for signs of successful diversification, while any acceleration in Apple’s in‑house chip rollout could further depress stock performance. In this environment, a cautious stance aligned with the ‘Underperform’ rating appears prudent, pending clearer evidence of new revenue streams.