Much has been written about Intel's shift in strategy in the wake of its decision to withdraw from the smartphone modem business. But despite the column inches, confusion persists about the company's position and its role in 5G communications. It’s important to emphasize that Intel hasn’t exited the modem business: its broader modem capability is currently under review and it continues to provide 4G smartphone solutions. However, the announcement does shine a light on where Intel’s 5G focus lies and underlines our long-held view that Intel never needed to win in modems to be successful in 5G.
Intel's statement that "it has become apparent that there is no clear path to profitability and positive returns" is reminiscent of the reasons Broadcom gave for its exit from the modem business in 2014. Success in modems requires substantial investment, engineering, performance and scale. After years of playing catch-up, Intel CEO Bob Swan took the difficult decision to cut the firm's losses.
However, his decision was made easier by the fact that Intel has a much bigger opportunity in 5G that sits more comfortably within its core data center business. As CCS Insight stated in April, "In our view, edge computing and 'cloudification' of the core and radio access network will be where Intel has most impact in 5G, and this will become a larger opportunity than its modem business" (see Instant Insight: Intel Data-Centric Innovation Day, 2019.)
Intel positions itself as a data-centric company focused on moving, processing and storing data in a market it estimates will be worth $300 billion. Its data center group made up almost half of Intel's total operating profit of $4.2 billion in the first quarter of 2019, and is focused on the opportunity in computing, networking and storage, which spans the cloud, enterprises and networks. This is the business that Intel knows, understands and is concentrating its efforts on.
With the arrival of 5G, networks are becoming more cloud-like. The endless array of proprietary hardware is disappearing as networks become increasingly defined in software and virtualized to lower costs and enable maximum scalability and flexibility. This means an end to the expense, rigidity and lock-in associated with traditional networking. More importantly, virtualization of the core and radio access network (RAN) will unlock more sophisticated and ambitious uses for 5G.
Carriers including AT&T, Verizon and Rakuten are well advanced in virtualizing network functions. AT&T hopes that by 2020, three-quarters of its core network will be virtualized, and Rakuten has worked with Intel to become the first 100% cloud-native mobile network when it launches later in 2019. Verizon, in partnership with Intel and Nokia, recently demonstrated that the combination of a virtualized 5G RAN with multi-access edge computing could cut its network latency in half.
Not all carriers are this advanced, but as global 5G deployments gather steam and pressure piles on carriers to prove the business case and find new revenue streams, upgrades to the supporting networking architecture are due to skyrocket in the coming years. Here lies the opportunity for Intel and its infrastructure partners; 5G brings the mobile network far closer to the computing, networking and software paradigm that has underpinned growth of the cloud. But for many carriers this is a brave new world. Trusted partners that understand the business realities of this transition from current networks will be crucial.
Moreover, the explosion of data will have to be captured, processed, analyzed and stored everywhere. This will take place in the cloud, through the network, at the network edge and on end points. Requirements are different for the various segments that Intel is addressing: commercial cloud, hybrid cloud, enterprise, networking, the Internet of things and edge computing. But there's also the need for architectural consistency for customers, partners and developers. This is essential if solutions are to scale up to meet the demand for computing in artificial intelligence, analytics, high-performance environments, multicloud scenarios, networking, databases, blockchain, virtualization and security.
5G is bigger than the mobile business. Like Intel, it's poised to become a central part of the new computing landscape.
Geoff Blaber is vice president of research for the Americas at CCS Insight. Based in California, Blaber heads CCS Insight’s Americas business and supports the range of clients located in this territory. Blaber's research focus spans a broad spectrum of mobility and technology, including the lead role in semiconductors. He is a well-known member of the analyst community and provides regular commentary to leading news organizations such as Reuters, the Financial Times and The Economist. You can follow him on Twitter @geoffblaber.
"Industry Voices" are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce staff. They do not represent the opinions of Fierce.