Love it, hate it, but you can’t ignore it, and that perfectly suits in case of Apple!
It is now no secret that the near future of smartphone and mobile network belongs to 5G. All the major smartphone makers have started advancing towards the soon-to-debut 5G network, so the major chip makers. While companies are leaving no stone unturned to have the early mover advantage, there is one major chip maker who wants nothing to do with 5G. Surprisingly, it’s no other than the world’s largest chip maker Intel Corporation (NASDAQ:INTC).
Acknowledged globally as the world’s largest chipmaker, Intel is pulling out of 5G smartphone modem industry just before it is supposed to enter the market. The official statement indicates the decision is made to allow so that the company can focus on 4G and 5G modems for PCs.
But is that really the case? Let us analyse this decision in a bit more detail.
The Apple-Qualcomm deal Ends Intel 5G Dream
One of the major reasons behind the withdrawal of Intel is the deal between Apple Inc. (NASDAQAAPL) and Qualcomm Inc. (NASDAQ:QCOM). Both the companies reached a settlement to drop all litigation charges against each other after a long drawn out lawsuit. What this has resulted in is an industry where Qualcomm becomes the biggest supplier without any competition close to it. Companies like Huawei who are claiming to make their own 5G modems are restricted to their own devices. Hence, it is difficult to see them as a threat to Qualcomm. What is also interesting to note is that Apple’s settlement with Qualcomm included a six-year licensing agreement and a multiyear chipset supply agreement. The settlement between Apple and Qualcomm can officially be interpreted as the last nail in the coffin in the smartphone chip industry for Intel, which was struggling to mark its presence in the smartphone segment.
But this leads us to a question – what made Apple settling all the dispute with Qualcomm, considering it was the iPhone maker who had accused and sued Qualcomm back in 2017? Apple accused and sued Qualcomm over enforcing unfair licensing terms back then. Some reports have also surfaced pointing towards the fact that the Cupertino giant was planning to sue Qualcomm two years prior to the actual lawsuit.
Then what exactly happened which changed Apple’s mind?
One of the possible reasons could be to include Qualcomm chips in the next generation iPhones to provide the best performing devices in the industry. The declining sales and intensifying competition in the smartphone industry is resulting in declining sales of iPhones with each passing quarter. In such a scenario there could be no better partner than Qualcomm who could help Apple by providing the powerful next-generation chipset capable of performing many innovative tasks on iPhones.
The decision might have affected Apple’s current savings by a little bit, but the future prospects and benefits outweigh this by a huge margin.
But, that’s not the only possible reason for Intel to detour the plan related to the 5G modem for smartphones. Another reason can be drawn out from the rumours surrounding the relationship between Apple and Intel. The latter had been working on the XMM 8160 5G chip, which was going to be used in the 2020 iPhone lineup. But apparently, they were unable to meet a lot of developmental deadlines set by Apple, leading to straining the relationship. This might have also played a part in Apple agreeing to settle in the Qualcomm lawsuit.
But, all said and done, Intel is not abandoning the 5G business altogether. It is definitely out for the 5G industry in smartphones, but not in the case of 5G modems for PCs. Therefore, exiting from an industry where you don’t have too much success to focus on the industry where the success and the margins are greater seems to be the logical choice for Intel.