On April 16, semiconductor firm Intel announced that it won’t manufacture mobile modems for any 5G phones. Notably, the corporation made the disclosure only hours after Apple and Qualcomm settled all their ongoing legal disputes.
Bob Swan, Intel’s chief executive officer, explained the company won’t be making 5G smartphone chips because the market isn’t lucrative. Instead, the tech giant will concentrate its resources on developing 5G mobile hotspot and smart home components.
“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,” said Swan.
Apple and Qualcomm are Back in Business
In 2016, Apple ended its relationship with longtime component supplier Qualcomm in favor of making a deal with Intel. The Silicon Valley giant’s decision to change component suppliers was followed by a copyright infringement lawsuit from its old partner. Subsequently, the iPhone maker sued Qualcomm for unpaid royalties and antitrust violations.
Just as the two tech corporations were about to head to court, they both agreed to drop their assorted legal claims. Furthermore, Apple made a deal to license Qualcomm patents for the next six years. As part of the deal, the semiconductor company (Qualcomm) will supply the electronics firm (Apple) with components for the next few years.
The surprise arrangement between the two former partners effectively removed Intel from the iPhone business. Accordingly, the chipmaker’s move to exit the mobile 5G business makes a lot of sense.
What Happens to Intel Now
Though losing a lucrative contract is never good, Intel’s withdrawal from mobility isn’t exactly the worst news.
As reported last month, the organization was the semiconductor market leader in Q4 2018, in part because of its product diversity. Samsung, the number one component manufacturer since 2017, lost its throne because 87 percent of its chipset business came from its smartphone segment. Because the global smartphone market has stagnated recently, Samsung experienced a 60 percent drop in revenues.
Intel didn’t suffer the same fate because only six percent of its income came from phone chipsets. Instead, the legendary component fabricator has been developing new hardware architecture such as its 10 core Comet Lake processors.
Industry analysts definitely support Intel’s pivot away from smartphones. The Wall Street Journal praised the move, arguing making iPhone parts was a money-losing proposition that strained the company’s production capabilities.
The marketplace also responded positively to the corporation’s change in direction. Intel’s stock rose by 3.66 percent the day after Swan made his big announcement.