Intel Cites Apple-Qualcomm Settlement as Reason Behind Exiting 5G Smartphone Modem Business

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Last week's surprise Apple and Qualcomm settlement and multiyear chipset supply agreement was the driving force behind Intel exiting the 5G smartphone modem business, according to Intel CEO Bob Swan.


"In light of the announcement of Apple and Qualcomm, we assessed the prospects for us to make money while delivering this technology for smartphones and concluded at the time that we just didn't see a path," Swan said in an interview with The Wall Street Journal, as noted by The Verge.

Swan's comment suggests that Intel was surprised by the Apple-Qualcomm settlement and acted reactively when it announced its exit from the 5G smartphone modem business just hours later, but multiple reports indicate that Intel was unable to meet Apple's demands for 5G modems in 2020 iPhones.

It's hard to imagine that Apple and Qualcomm would have suddenly settled their bitter legal battle if Intel was able to supply 5G modems for 2020 iPhones, but Intel was reportedly struggling with its 5G modem development, possibly leaving Apple with little to no choice but to settle with Qualcomm.

iPhones have a long development cycle, so it was likely crunch time for Apple to choose a 5G modem supplier for its 2020 iPhones. Given this long lead time, Intel is still expected to supply LTE modems for 2019 iPhones.

Article Link: Intel Cites Apple-Qualcomm Settlement as Reason Behind Exiting 5G Smartphone Modem Business
 

gnasher729

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Makes total sense.

Intel expected a large order from Apple, and that order is now going to Qualcomm. That order would probably have been big enough to justify development cost to Intel. Now it's not.

This isn't anything shocking. The only shocking thing is how FAST they announced it right after the settlement.
That was prepared. The possible outcomes were: Apple wins and buys Intel chips. Apple wins and buys Qualcomm chips. Qualcomm wins and Apple buys Intel chips. Qualcomm wins and Apple buys Qualcomm chips. They settle and Apple buys Intel chips. They settle and Apple buys Qualcomm chips.

Intel had six press releases ready :)
 

locovaca

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Makes total sense.

Intel expected a large order from Apple, and that order is now going to Qualcomm. That order would probably have been big enough to justify development cost to Intel. Now it's not.



That was prepared. The possible outcomes were: Apple wins and buys Intel chips. Apple wins and buys Qualcomm chips. Qualcomm wins and Apple buys Intel chips. Qualcomm wins and Apple buys Qualcomm chips. They settle and Apple buys Intel chips. They settle and Apple buys Qualcomm chips.

Intel had six press releases ready :)
So do the other press releases get sent to poor children in Africa?
 

LordVic

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The way this has been playing out is very interesting. Sounds like there was some sort of back room cartel like deal that Intel and Apple were working out in order to prop up Intel's modem business and technology. Without Apple, Intel either has no actual business with their 5g modems, and can't technologically keep up.

based on everything so far, this is how I feel like it was being played.


Apple goes after Qualcomm in hope to publicly diminish Qualcomm's value and market cap.

Crippling Qualcomm's public image and driving down the market cap makes Qualcomm ripe for hostile take-over. It was believed that Broadcom was a top candidate to purchase Qualcomm at that time. Broadcom seems historically far more likely to make Apple favoured deals.

Something changed, and the valuation didn't continue to drop like Apple wanted. Instead, Qualcomm was poised to win a large portion of the lawsuits, to the point where Apple themselves were threatened to losing ability to sell their iphone 6 through X in major markets. qualcomm's stock rebounds and no outside takeover possible.

Qualcom Wins the major sticking point between the two. Apple realized that they are now in a losing position, and settle with Qualcomm out of court. Judging from the rumours and information in the settlement, Apple got a worse deal than they originally even had.

During all this, there were rumours, and Qualcomm complained that Apple was demanding source code. Qualcomm believed that providing it to Apple, Apple was feeding details and technology from that code to Intel. This sounds like Apple was setting up a fall back plan should the original plan to drive Qualcomm value down. The backup plan being, Get Intel technology so that their modems could compete. Thus, if qualcomm deal falls through, They could rely on Intel's favourable pricing. Intel likely didn't have much other business in 5g modems, and relied on Apple feeding them tech from Qualcomm to continue their development work, in addition, without any other major purchasers, there was just no business sense to keep making Intel modems.


it's a really interesting story, and I honestly didn't expect the outcome we had.
 

JosephAW

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It's almost like Intel was looking for an excuse to exit them 5G market. Maybe a high failure rate on silicon.
This will help Apple accelerate towards dropping the x86 in their desktops as they move towards merging desktop and iOS devices with ARM chipset.
Looking forward to a whole new level of performance on desktops and mobile.
 

Sasparilla

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Maybe eventually we'll hear the real details. Betting it was Intel wasn't going to be able to deliver 5G (with desired performance) in time for iPhone Sept 2020 (which we'd been hearing rumors of for several months) and Apple had fold and make up with Qualy rather than probably not have 5G for the 2020's. JMHO...
 
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7thson

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It's kind of fascinating that Intel couldn't compete with Qualcom. Not mentioned is the fact that without Apple, a top tier company, behind them they, Intel, a well established chip manufacturer, couldn't even count on selling to smaller companies, like Oppo or Motorola because there are already chip manufacturers capable of fulfilling those companies needs reliably, ie Samsung and Mediatek. Doing business with Apple is cutthroat. Keep up with the pace or get left behind.
 
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JPack

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In reality, Intel decided months ago they would exit the 5G smartphone business. Intel was behind schedule and Bob Swan knew high margin x86 processors were a better use of the fabs.

Look back at MWC2019, the most important event for the mobile industry. What did Intel show? Processors designed to accelerate 5G network traffic. They didn’t mention or demo anything related to 5G smartphones.

Apple obviously knew about Intel’s situation and went back to settle with Qualcomm. Keep in mind it was Apple that wanted to change Qualcomm’s entire business model and cut them down to size.
 

Intellectua1

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The way this has been playing out is very interesting. Sounds like there was some sort of back room cartel like deal that Intel and Apple were working out in order to prop up Intel's modem business and technology. Without Apple, Intel either has no actual business with their 5g modems, and can't technologically keep up.

based on everything so far, this is how I feel like it was being played.


Apple goes after Qualcomm in hope to publicly diminish Qualcomm's value and market cap.

Crippling Qualcomm's public image and driving down the market cap makes Qualcomm ripe for hostile take-over. It was believed that Broadcom was a top candidate to purchase Qualcomm at that time. Broadcom seems historically far more likely to make Apple favoured deals.

Something changed, and the valuation didn't continue to drop like Apple wanted. Instead, Qualcomm was poised to win a large portion of the lawsuits, to the point where Apple themselves were threatened to losing ability to sell their iphone 6 through X in major markets. qualcomm's stock rebounds and no outside takeover possible.

Qualcom Wins the major sticking point between the two. Apple realized that they are now in a losing position, and settle with Qualcomm out of court. Judging from the rumours and information in the settlement, Apple got a worse deal than they originally even had.

During all this, there were rumours, and Qualcomm complained that Apple was demanding source code. Qualcomm believed that providing it to Apple, Apple was feeding details and technology from that code to Intel. This sounds like Apple was setting up a fall back plan should the original plan to drive Qualcomm value down. The backup plan being, Get Intel technology so that their modems could compete. Thus, if qualcomm deal falls through, They could rely on Intel's favourable pricing. Intel likely didn't have much other business in 5g modems, and relied on Apple feeding them tech from Qualcomm to continue their development work, in addition, without any other major purchasers, there was just no business sense to keep making Intel modems.


it's a really interesting story, and I honestly didn't expect the outcome we had.
There's several articles out there that say exactly what you think, I've actually been waiting about a week for MacRumors to report this but they didn't. Here's a couple for you.

https://www.cnet.com/news/apple-plotted-to-hurt-qualcomm-years-before-it-sued-the-company/

https://forums.appleinsider.com/discussion/210675/apples-will-to-hurt-qualcomm-financially-illustrated-by-qualcomms-opening-statement
 
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LordVic

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There's several articles out there that say exactly what you think, I've actually been waiting about a week for MacRumors to report this but they didn't. Here's a couple for you.

https://www.cnet.com/news/apple-plotted-to-hurt-qualcomm-years-before-it-sued-the-company/

https://forums.appleinsider.com/discussion/210675/apples-will-to-hurt-qualcomm-financially-illustrated-by-qualcomms-opening-statement
wow. I hadn't read any of that. Sometimes even I surprise myself by being able to read into things based off little evidence. Being right all the time is a curse I tell you ;)


But from Day 1, It really didn't look like Apple's claims against Qualcomm had a lot of merit and really did read more like an attempt to use Public perception as a bargaining chip in order to financially hurt a vendor they wanted a better deal from.

Given Apple's existing history of litigation for the purpose of publicly hurting their competition, it doesn't come as a surprise this was the reason here as well.
 

creep144

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For the record, I'd just like to cite rain as a possible reason behind the ground sometimes being wet, but I'm very eager to hear more from Intel on this Apple-Qualcomm matter.

View attachment 833936
Don't let anyone tell you that it is raining while they are peeing on your head. The real reason is they know that it won't work with my Mac Pro 3,1 and Intel's just might. They're always one step away from losing me as a return customer. Going on close to 40 years now.
 

JetTester

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Sounds about right except for the fact that Intel made the announcement within a couple hours of Apple/Qualcomm announcement. You don't make gazillion dollar decisions that fast. They evidently had some expectation that this would happen, and were already prepared for this eventuality. Probably already had the press release prepared.
 

PickUrPoison

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Despite the delusional postings here, Apple got pretty much everything they wanted—which never included a hostile takeover of QC—by the settlement:

1) Instead of paying the $9+ billion in back royalties owed, QC settled for $5-6 billion. Big Apple win.

2) Instead of a $20 royalty, QC settled for $8-9—less than they were paying 10 years ago for a 3G SEP license. Huge Apple win

3) Apple gets a 6-8 years direct license with QC that they wanted so they could build their own modem—without the BS that QC has previously demanded, like cross-licensing. Exclusivity is likely not required either. Big Apple win.

4) Apple gets a guaranteed supply of 5G modems at a price acceptable to them, and may or may not dual-source through Samsung (I suspect not). QC gets the chip order—as long as they’re reasonably priced they might get 100%—for as long as Apple needs them through a multi-year supply agreement. Both Apple and QC benefit.

5) 100+ legal actions worldwide are ended, a benefit to both.

With their entire business model at stake and their revenue, earnings and stock price under pressure, QC had the most to lose from the potential outcome of the trial, and consequently the most to gain from settling. Apple was in the driver’s seat. They certainly weren’t crawling to QC on their hands and knees begging for chips after Intel suddenly cancelled their 5G modems as the Apple-hate crowd had theorized—though until this Swan statement that’s exactly what they claimed.

QC wouldn’t sell chips to Apple to support the 2017 models, thinking they could force them to the table, but Apple just gave Intel 100% of their business instead of 50/50 split with QC. Apple COO Jeff Williams testified several months ago that they wanted QC chips, but that QC wouldn’t support them. But suddenly a few weeks ago, things changed. A week before the trial started, Qualcomm’s President said “We’re still in San Diego, they have our phone number. If they call, we’ll support them.” They didn’t want to go through with this trial and they were ready to settle. Game over.

The settlement was extremely favorable to Apple, but for those who insist on spinning this as a QC win at Apple’s expense, feel free to believe whatever you wish. One thing that’s certain is that no amount of facts or logic will ever dissuade you.
 
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Hazmat401

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I think the real reason why Intel had a hard time developing 5G chips is because they couldn’t develop a superior chip to Qualcomm’s chip without infringing on their hundreds of patents

This is intel here... the i9 is a masterpiece
 

PlayUltimate

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Sounds about right except for the fact that Intel made the announcement within a couple hours of Apple/Qualcomm announcement. You don't make gazillion dollar decisions that fast. They evidently had some expectation that this would happen, and were already prepared for this eventuality. Probably already had the press release prepared.
Similarly, Apple/Qualcomm did not settle overnight. Coming to an agreement for a 6 year deal probably took at least a few days. Intel probably had indications that Apple and Qualcomm were talking and thus made specific, as others mentioned, press release and business contingencies.
 

magicschoolbus

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This is going to cost Intel in the long run - mobile is the future of all things.. not a very good long term solution on their part.
 
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Hazmat401

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This is going to cost Intel in the long run - mobile is the future of all things.. not a very good long term solution on their part.
I wouldn’t count them out that fast... if intel can figure out how to put an i9 into an iPhone without impacting battery life... guess what’s everyone’s smartphone and tablets Gonna be rocking intel processors
 

ZipZap

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Seems to me that the Intel chips were going to be a setback for Apple. Though I am sure they would have denied the issue had a phone with the intel chips been released. Apple realized this and moved to settle
 
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