The Rumored Unannounced C1 Modem Was in Limbo, Until It Wasn't

Over the past few years, and as recently as last year, there were...let's just call it...severe doubts that Apple would ever make anything of its $1 billion purchase of Intel's 5G business (and its patent portfolio, of course) back in July 2019.

In late November 2023, the estimable Mark Gurman (who, to be fair, has always been most accurate in product intel, rather than technology rumors akin to Ross Young/DSCC's remarkable track record in displays) was quite negative on Apple's 5G modem prospects. The article, which is paywalled post-headlines, made a very specific subheading claim:

Well, it's the second month of 2025. And all of the doubters, myself among them, appear to have been wrong.

Of course the Apple C1 modem, for all its potentially promising efficiency and integration benefits per a Reuters interview/report, is being exclusively deployed in what's arguably one of the lowest-risk iPhones. That would be the iPhone 16e, probably best described as a spiritual successor of the iPhone SE-series.

"Cheap iPhones" are an important part of Apple's product strategy, but as Apple itself implicitly admitted during the launch of the very first iPhone SE back in 2016, they weren't a particularly large segment of iPhone's unit sales - perhaps 30 million out of safely over 200 million. The iPhone SE had three generations of being smaller-screened than non-SE phones, and it's true that Apple is addressing the screen size issue with iPhone 16e. However, the price of admission is also up, $170US in absolute terms (versus the iPhone SE 3's $429 starting price), $120 when adjusting for the higher starting storage tier.

So if we start with the assumption that iPhone 16e could be "about as popular as iPhone SE ever was", the C1 modem is absolutely being deployed at scale, but not as the moonshot that makes or breaks Apple's 5G product aspirations. After all, Apple exercised its option to extend its Frenemy 5G Settlement Deal™ with Qualcomm from a 6-year term ending around April 2025 to an 8-year total term ending around April 2027.

And about that...

More Freedom to Innovate Does Not Mean Total Freedom from Qualcomm

Even though Apple has taken its first, very ambitious cellular connectivity step away from Qualcomm, apparently it can't ever be completely free of Qualcomm, which is famous, perhaps infamous for...let's say commercially maximizing its massive cellular patent portfolio, in a very aggressive manner.

Why not, even though Apple's likely end goal is to never buy Qualcomm cel modems into the future? Here's what's known based on the very little publicly available information we have about that settlement, courtesy Qualcomm itself:

"• Direct license between Apple and Qualcomm: six years with two-year option to extend

• Effective as of April 1, 2019

• Apple will pay royalties to Qualcomm

• Settlement includes a one-time payment from Apple to Qualcomm

• Multi-year chipset supply agreement"

(Emphasis mine - quoted portion of "Presentation" slide from https://investor.qualcomm.com/news-events/investor-events/events/event-details/2019/Qualcomm-and-Apple-Reach-Multi-Year-Agreement/default.aspx)

Apple's C-chips definitely set iPhones on a path of eliminating any need for "chipsets" such as the Qualcomm X75 modem said to be in the iPhone 16 Pro lineup. That might have a certain impact on iPhone COGS (and definitely Qualcomm's "5G Modem-RF" business), since Apple is taking that critical baseband chip and transceiver technology in-house. But that doesn't solve the problem of royalties. There's an intellectual property licensing fee that must be paid for every single Apple product sold which contains any cel modem - for iPhones, it's just a question of the "basic" standards-essential patent package, or the full patent portfolio licensing package. You can check out the publicly accessible "5G Handset" licensing program in this link, if you like - or dare.

The "vanilla" terms, for example, are listed as 3.25% net selling price of "handsets" for the basics with a modem that's backwards compatible with 3G/4G; or 5% of the net selling price for the portfolio license. Capped per-device royalty fees? Qualcomm leaves itself "discretion" to negotiate non-essential patent royalties? What does it all mean?

Clearly, Apple has found its current arrangement (2019-2027) acceptable at some level. But how will things go as Apple negotiates out to, say, 2033 or beyond? (Yes, Qualcomm is hardly the only cellular tech-related patent holder out there - as the buyer of Intel's 5G business, Apple is too. They're just the one who seems to be most in the news about licensing issues.)

And you can bet that Qualcomm, as a leader in 5G, is hard at work on its "6G" patent/technology portfolio as well. So entire industries will probably continue to be paying Qualcomm royalties well into the future.

Luckily, Apple happens to be one of the strongest, most battle-hardened cellular device OEMs in the business. And it's fairly clear from past history that any drama from renewed Apple-Qualcomm negotiations covering royalties or chipset purchases isn't likely to be a particularly serious threat to the iPhone business. As bitter as the legal dispute seemed in 2019, it ended rather abruptly with a terse joint statement of settlement, and both companies basically moved on. Maybe Qualcomm will act more FRAND-ly to avoid regulatory scrutiny and more companies trying to reduce their reliance on Qualcomm chipsets and/or IP.

The bigger question for the Apple installed base might be how Qualcomm's inevitable cellular patent gatekeeping impacts Apple deploying cellular technology to other product categories, from Macs to Apple TV to Apple Vision (Pro), or other product categories Apple doesn't currently play in, from security cameras to perhaps the return of AirPort as a universal connectivity hub with 5G as either backup or main Internet connection.

Are Royalties Necessarily the Only Barrier to Cel-Enabled Tech?

And I've actually "hidden" one final issue from you, dear reader, all along. While Qualcomm may always be a significant determinant of Apple's scope of cel modem technology deployment across its product line (after all, they'll justifiably seek royalties from any device with a cel modem), it could be celcos themselves which ironically stand most in the way to wider adoption beyond smartphones, and some substantially smaller percentage of modern tablets, PCs and wearable devices.

Want to add a tablet or a fairly-rare cellular-enabled laptop to a Typical Unlimited Data Plan™ in the US? Depending on carrier, that's maybe $10-20/mo. more per device.

How about a smartwatch? Here things might be a bit better - even standalone postpaid cellular connectivity plans can be found for around $10/mo., although really, there's only so much data a smartwatch will practically use compared to a smartphone.

Sure, T-Mobile offers a $5/mo. access charge for any of the aforementioned tablets, laptops or smartwatches, but you still need one of those unlimited data plans, and it can only offer 30GB monthly fast-data limits for laptops and tablets in exchange for that lower price.

What about other devices where having a permanent cellular connection might be useful? For security cameras, there are very few options on the market, and data plan prices are all over the map. Verizon offers a $20/mo. plan for supported cameras - but since cel modems are given unique identifiers, it seems that a single camera counts as "one cellular line", so the monthly charges could quickly add up.

Let's...not even bother putting a cel modem with eSIM in the fridge, then. And it's good that Wi-Fi 6/7 networks are relatively affordable to deploy, even if increased speed and increased signal range are often at odds with one another.

In the meantime, the Apple userbase can hope for increasingly performant and efficient C-chips for iPhones, and keep said iPhones close at hand for quick sessions of data tethering where enabled by the carrier.