Apple's greatest chip challenge: Replacing Qualcomm cellular modems

Modems are one of the most critical components in an iPhone, connecting the device to cellular networks so users can browse the web, access apps and make phone calls

Apple Inc. has become a chip powerhouse in the past decade, beating some of the semiconductor industry’s leading companies at their own game. But the iPhone maker is embarking on its biggest challenge to date as it tries to replace Qualcomm Inc. cellular modems with its own design.

Qualcomm slumped more than 7% to $144.28 on Friday, its steepest decline since June, after Bloomberg reported that Apple kicked off development of its own modem this year. That reaction underestimates the task that confronts Apple in coming years, according to analysts. Some even questioned whether the Cupertino, California-based technology giant can succeed.

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