We brought up a couple of days ago how hated Apple (AAPL US) stock is and how that could provide potential opportunities.  In addition, Apple have over the last couple of years been in dispute with Qualcomm (QCOM US) about various IP issues. We wrote earlier about these IP issues, and how Qualcomm won a court-ruling in China about IP rights against Apple. Now it appears that Apple is stepping up its efforts to reduce its dependence on various suppliers, starting with Qualcomm. There are reports that Apple are in the process to develop its own modem chips as part of its efforts to in-house more chip production. The Information writes;

Now Apple has provided the clearest evidence yet that it is working on one of the most complicated and expensive hardware ingredients in its devices: a cellular modem. In a job listing posted a week ago, which hasn’t previously been reported, the company said it is looking for a cellular modem systems architect 

The project follows the souring of Apple’s relationship with its longtime modem supplier, Qualcomm, over the patent licensing fees the iPhone maker had to pay to Qualcomm on top of the cost of its chips

The modem chip is the most important wireless component within a smartphone. Apple is more and more moving towards controlling the development and production of these chips. This comes back of Bloomberg reporting Apple’s hiring away engineers from Qualcomm.

Apple Inc. is aggressively hiring engineers in Qualcomm Inc.’s home base of San Diego, seeking designers to develop wireless components and processors that would further weaken the chipmaker’s chances of again supplying chips for the iPhone maker’s future device

Currently Apple is using Intel (INTL US) chips, but the company could be looking to drop them as well as there has been reports of poor performance. 9 to 5 Mac noted this earlier this fall;

As is the case every year, some iPhone XS early adopters are reporting issues with their new device. Since the iPhone XS and iPhone XS Max were released last week, a handful of users have taken to Reddit and Apple’s Support Forums to complain of poor Wi-Fi and cellular connections on both of Apple’s new iPhone models.

Ultimately, a hardware fix would be the most optimal solution, but that is of course nearly completely out of the question for Apple this late in the game. Thus, WiWavelength says it’s likely worth waiting to see just how much and how often these radio issues affect users

Apple commenced using its own chips in 2010 as it released its first iPad. Today Apple uses its own Bluetooth and Wi-Fi chips for its Apple Watches and Airpods. For various Apple suppliers such as Broadcom (AVGO US), Cirrus Logic (CRUS US), Skyworks (SWKS US), Jabil (JBL US), Qorvo (QRVO US) and Taiwan Semiconductor Manufacturing (TSM US) all these developments could be worrisome.  

Several factors might be affecting Apple’s moves towards more in-house production. Firstly, as we noted earlier smartphone sales seem to have plateaued. Worries about prices of Apple products have also emerged. A good approach is to bring production in-house and get rid of middle-men to further the margins. Furthermore, with the current political climate, it would benefit Apple to have more control of all of the production process to avoid potential effect of various supply-chain disruptions. All of this means, could mean lower sales for suppliers, or at least lower margins, whilst Apple with its size garnishes more and more control and total value.