On April 16, Apple and Qualcomm ended years of public acrimony and legal wrangling with a surprise settlement. Additionally, the pair has made arrangements to resume their once fruitful partnership as Apple will license patents and buy chips from its old collaborator. The two tech giants coming to terms was followed by another unexpected development, Intel has exited the 5G smartphone business.
In the aftermath of these momentous events, here’s a look at three major implications of the Apple/Qualcomm deal.
Apple’s Decision to Use Intel’s Mobile Chipsets was a Mistake
Whatever Apple’s ambitions were in having Intel make modems for its iPhone line, it’s now fair to say the experiment ended in failure. For one thing, the Cupertino, California-based company’s sourcing switch up resulted in protracted litigation with its old component supplier.
Though Apple and Qualcomm are buddy-buddy now, the smartphone maker was losing multimillion-dollar court cases against the semiconductor firm just a month ago. Furthermore, the electronics corporation didn’t even get good products out of its Intel pact. iPhones equipped with Intel modems were consistently outperformed their Qualcomm-enabled counterparts.
Intel is a world-class microchip producer but it never quite mastered the art of making smartphone modems.
The truth is the softening of the global smartphone market would’ve hurt Apple no matter what new products it released. But the company shot itself in the foot by putting out overpriced, underperforming hardware. Now, thanks to the court settlement, Apple will be using its old chip vendor’s patents and components for years to come. The corporation will resume releasing equipment with high-quality chipsets and consumers will likely respond favorably.
Then, in a few years, Tim Cook can pretend the whole Intel-powered iPhone era never happened.
Qualcomm will likely Dominate the 5G Mobility Market
Qualcomm estimates the 5G mobile value chain will generate $3.5 billion in revenue by 2035. Judging by its recent moves, the tech giant clearly intends to gobble up as much of that market as it can. Indeed, most of the firm’s rivals are still working on their first fifth-generation mobile chipset. But Qualcomm debuted a new 5G modem capable of download data at a rate of 7 Gbps in February.
Admittedly, the corporation does have some high-profile competition in realizing the potential of the new technology.
Motorola has already released an add-on that will turn its Moto Z3 into a fifth-generation handset. Samsung will release its highly anticipated Galaxy 5G smartphone in May. Conversely, a Qualcomm-powered iPhone 5G will not be available for sale until 2020. However, this is an instance where being late to the party isn’t necessarily a bad thing.
For all its promise, 5G isn’t going to be a big deal in 2019. Verizon and AT&T have officially launched their 5G networks, but only in a handful of cities. The major carriers won’t offer nationwide high-speed mobile internet until sometime next year. As such, fifth-generation smartphone early adopters are bound to be disappointed
Since Qualcomm has a deal in place to provide modems for the 2020 launching iPhone 5G, its imposition to become the market leader. As long as the next generation iPhone isn’t a complete disaster, it has a good chance of being the definitive fifth generation mobile handset. Accordingly, the semiconductor company might have its patience rewarded with some truly staggering revenues.
Apple May Source Chips from Another Vendor
While Apple has inked a six-year components sourcing deal with Qualcomm, the firm is still keeping its options open. Controversial telecom equipment company Huawei recently confirmed its open to producing 5G chips for the iPhone. Similarly, the Silicon Valley corporation has talked to Samsung and MediaTech about producing fifth generation modems for its products.
The Verge also pointed out Apple might start producing its own 5G chips. Indeed, the company could benefit in several ways by manufacturing its own modems. Most prominently, it wouldn’t have to license chipset patents from outside vendors anymore. Additionally, if it wanted to end its partnership with any of its component supplier, it could do so with impunity.
Neither Apple nor Qualcomm executives have gone on record as to why they suddenly came to terms. However, one potential reason could be Apple was dissatisfied with Intel’s chipsets but didn’t want to significantly delay the release of the iPhone 5G. Cutting a deal with Qualcomm gives the organization the flexibility to put a quality product in the near term while keeping their options open long-term.
It’s also worth noting that Apple has been aggressively diversifying its business recently. Within the last month, the firm has unveiled its own branded credit card and subscription video on demand service. Consequently, it’s not going to live or die based on the sales of the next generation iPhone.
So, though Qualcomm won big in its new deal with Apple, the multibillion-dollar conglomerate may have the last laugh.