Apple’s nightmare over 5G modems is set to continue, reports Aaron Tilley for The Information. Although the issues spilled over in public last month, the relationship has been strained for much longer.
For Intel, the loss of Apple as a marquee customer for its modems dealt a blow to a long-running search for growth beyond personal computers. Hours after Apple announced its agreement with Qualcomm last month, Intel CEO Bob Swan said in a statement that the company planned to get out of the 5G smartphone business as it saw no “path to profitability and positive returns,” causing its stock to jump 3% the next day. The Wall Street Journal reported that Apple had held talks last summer with Intel about acquiring the business, but that the talks had cooled.
Chinese customers are seen experiencing and choosing Apple’s products in an Apple store on January 3, 2019 in Beijing, China (Photo by Lintao Zhang/Getty Images) GETTY
With Apple splitting the modem order for the iPhone in 2016, Intel had a major partner for its modem business, and following that Apple committed 100 percent to Intel and cut Qualcomm out of its supply chain, even though from an engineering point of view the Qualcomm chips were seen by Apple as having better performance. Tilly sets up the quandary:
But Apple was trapped. Earlier this year, Apple’s Chief Operating Officer Jeff Williams testified in the FTC-Qualcomm trial that Qualcomm refused to supply modem chips for Apple’s 2018 phone lineup because of an ongoing lawsuit between the two companies. The lineup—which included the iPhone XS, XS Max and XR—eventually shipped exclusively with Intel modems.
Then came 5G The new technology promises faster connectivity and allows far more cloud based and data heavy services. It’s a key part of the next generation of smartphones. And the Intel process was not matching Apple’s demands. The solution?
A slice of humble pie saw Apple back down from its legal fight with Qualcomm earlier this spring and negotiate a deal for 5G modems. Even with Qualcomm’s strength, it’s unlikely that the iPhone family will see a 5G device announced until late 2020, and it could be that significant volumes will not be available until well into 2021.
In the short- and medium-term, Apple is tied to Qualcomm for the next few years and Tim Cook’s team has virtually no leverage over 5G modem technology (it’s unlikely that Apple would pick up Huawei’s offer to supply 5G modems). While there are in-house efforts to design a modem (in a similar approach taken to the system on chip design for the Axx chips), these are not elected to bear any fruit until 2025.
No doubt the idea of using Intel to diminish Qualcomm’s whip-hand was attractive, but the issues around building that viable alternative with Intel have amounted to nothing and Apple finds itself in a rare subservient relationship with a key supplier.
The question now is how much this relationship breakdown between Apple and Intel will impact the MacBook, which is already suffering delays.