Intel scraps its 5G smartphone modem plans

Intel headquarters
Intel said it would instead continue to invest in its 5G network infrastructure business. (Walden Kirsch/Intel Corporation)

Intel said it will be exiting the 5G smartphone modem market in a surprising announcement, opting instead to continue to invest in its 5G network infrastructure business. Intel was expected to supply Apple with smartphone 5G chips by 2020. The company said it’s scrapping its 2020 plans and won’t release any 5G smartphone modems, though Intel will complete its current customer commitments for 4G LTE smartphone modems.

“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,” said Bob Swan, who was appointed CEO of Intel at the beginning of the year. “5G continues to be a strategic priority across Intel, and our team has developed a valuable portfolio of wireless products and intellectual property. We are assessing our options to realize the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world.”

Intel’s exit might hint that either its contract with Apple was not profitable, or that Intel didn’t think it could grow the business beyond Apple, according to Techsponential analyst Avi Greengart. And noting that Apple has been hiring RF engineers, he said in a blog post it could also indicate that “Intel’s new management could not justify investing in new modems for Apple while Apple built its own group to eventually replace them.”

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“Mobile 5G modems are a core part of Qualcomm’s business not an Apple-related R&D expense, so Qualcomm can afford to work with Apple for six years and then see where things stand,” Greengart said. “Intel would rather focus its 5G R&D on more strategic opportunities in infrastructure, auto, and computing.”

Apple has historically used Intel and Qualcomm to supply chips for its smartphones, but its relationship with Qualcomm had soured in recent years over an escalating patent war. That left Intel as Apple’s sole supplier for 5G modems. Apple has pegged a September 2020 launch for its 5G iPhone, although industry speculation indicated Intel was struggling to meet that deadline.

The news of Intel’s exit from the 5G modem business comes as Apple and Qualcomm unexpectedly announced they had reached an agreement to dismiss all their litigation against each other—litigation that centered around Apple’s purchase of modem chips from Qualcomm.

RELATED: Qualcomm and Apple abruptly drop all litigation

Now, it seems Apple is pivoting to Qualcomm for 5G modem chips to keep its 2020 timeline for the 5G iPhone, although Huawei offered its chips earlier this week to Apple.

The news of rival Intel’s exit from the 5G modem business was an added boon to Qualcomm yesterday. Its stock jumped 23% yesterday in light of the news, while Wall Street analysts said the Apple-Qualcomm patch up could put put pricing pressure on RF vendors Skyworks, Broadcom, and Qorvo.

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