When Apple and Qualcomm settled their legal cases, Intel experienced the consequence of that truce. Intel is Apple’s current 4G modem supplier but has struggled to create 5G modem. With the Apple 5G modem opportunity out, Intel does not see a clear future therein. Consequently, Intel has exited the 5G modem business.
Intel abandoned its efforts to develop modems for the next generation of wireless technology Tuesday, just hours after rival Qualcomm reached a settlement with Apple over wireless technology for the iPhone.
Intel chief executive Bob Swan said the chipmaker is now “assessing our options” for the future of its wireless business but said the forthcoming, superfast 5G technology “continues to be a strategic priority across Intel.”
“We are very excited about the opportunity in 5G and the ‘cloudification’ of the network, but in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns,” Swan said in a written statement. He said the company will say more about its wireless plans when it releases first-quarter financial results next week.
This was my postulation when the truce news broke: Apple wanted 5G modem and no one would give it that but Qualcomm. With Intel not ready, and Huawei a no-go-area, Apple had to dance to the music of Qualcomm. So, magically, the legal cases and the premises upon which they were built became irrelevant – iPhone 5G must be in the market to compete with Samsung Galaxy! Just like that Apple has to work with Qualcomm, and yes – they settled.
Do not be deceived, Apple would not have settled with Qualcomm if it has any other alternative to get 5G into iPhone effectively. As it stands today, Intel is not ready and Huawei is a no-go area, so only Qualcomm can power Apple’s 5G future. That is why after all the wasted years and making lawyers richer, Apple agreed to pay Qualcomm to close all the legal issues, and then quickly placed orders with six-year licensing agreement.
But note that market rewarded both Intel and Qualcomm – Intel has no business in 5G modem; high-end mobile modem has always been Qualcomm domain. Simply, Intel should focus on what it knows how to make – server chips. Yes, markets think Apple just did Intel a favor by getting it to focus on what it knows how to do. For Qualcomm, it was a moment – the enemy is back to the fold, as a friend. The stock responded.
Apple and Qualcomm were always going to settle, eventually. When Apple sued Qualcomm over alleged monopolistic contracts, extortionist pricing practices, patents infringements, and other poisons in the new year, Qualcomm had not only counterclaimed but also countersued.
The only way out of such battles between big boys is settlement, except you want to have a long war like that between Apple and Samsung. So I’m happy that both Apple and Qualcomm have settled this matter. While this settlement allows Intel focus on its core market as you have said, I am more concerned about the monopoly this might lead to in the market. I remember that anti-trust regulators have raised concerns about this before.
In Europe, Qualcomm was fined $1.2 billion for paying Apple to use its chips and keep its fingers off competitors’ chips from 2011 to 2016. With the new romance between Apple and Qualcomm, regulators should keep their eyes open.
My Response: Good points. Intel is not leaving out of strength. It knows it cannot compete with Qualcomm on 5G modem and with Apple signing 6- year contract, there is no market to serve. So, not pretending it is still doing 5G modem is wisdom. On antitrust, it is what it is – the market is free, anyone can jump in if you can handle the heat. That should not be an issue.
It’s about making use of that famous thing called ‘common sense’, which most times – a lot of people fail to activate theirs, thereby allowing their stupidity to take preeminence! Apple was able to activate its common sense, Intel did same, Qualcomm did likewise; so all of them are likely to live happily after.