Intel’s 5G smartphone modem exit comes as a surprise
On April 17, Qualcomm (QCOM) and Apple (AAPL) suddenly settled their two-year licensing dispute, over which the two companies had spent millions of dollars. The dispute was expected to end with a settlement instead of a court ruling as the two parties had a lot at stake. But the timing of the settlement came as a surprise as both parties were ready for a showdown at court. What came as an even bigger surprise was Intel’s (INTC) announcement that it’s exiting the 5G smartphone modem business shortly after Qualcomm and Apple announced the settlement.
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Intel stated that it will continue to supply its existing 4G modem to customers but stop work on the 5G modem for smartphones, which it planned to launch in 2020. Intel had put a lot of effort into the 5G modem, securing Apple’s business. Intel seemed to be moving fast in the 5G space, perhaps trying to catch up with Qualcomm.
Intel’s announcement makes sense as Apple was its only major customer for modem chips, and the iPhone maker’s truce with Qualcomm means that the latter will supply modems for some iPhones. Moreover, given Qualcomm’s lead in the 5G modem space, its modems might appear in 2020 iPhones. The only force driving Intel to invest in the modem was Apple, and with that factor gone, it didn’t make financial sense for Intel to continue with the investment.
However, the timing of Intel’s announcement fueled speculation that the chipmaker was behind the Qualcomm-Apple settlement.
Was Intel behind the Apple-Qualcomm settlement?
Apple was fighting with Qualcomm because it had Intel’s modem to fill the void. Intel delayed its 5G modem in November 2018, jeopardizing Apple’s plan to launch 5G iPhones in 2020. Apple searched for alternative suppliers, but none met its requirements.
Some analysts believe Intel probably informed Apple of its plan to exit the 5G smartphone modem business, removing Apple’s only support in fighting Qualcomm. As Apple was left with no other 5G modem supplier to meet its qualitative and quantitative requirements, it settled with Qualcomm, which might explain the sudden settlement and Intel’s immediate announcement of its exit from the 5G smartphone business.