Intel ditches 5G smartphone modem business

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Intel expects to generate over $3.5 billion in AI-driven revenue in 2019.
Intel expects to generate over $3.5 billion in AI-driven revenue in 2019.

Intel, which was Apple's sole supplier of iPhone chips during the past year, plans to exit the 5G smartphone modem business after its competitor, Qualcomm, and Apple yesterday unexpectedly ended a $1 billion patent dispute.

In a statement issued yesterday, Apple and Qualcomm announced an agreement to dismiss all litigation between the two companies worldwide.

The settlement includes a payment from Apple to Qualcomm, they note, adding the companies have also reached a six-year licence agreement, effective as of 1 April 2019, including a two-year option to extend, and a multi-year chipset supply agreement.

In January 2017, Apple announced a $1 billion lawsuit against Qualcomm for overcharging for chips and failing to pay $1 billion in rebates. Qualcomm, however, rejected the accusations, calling the claims "baseless".

On 24 January 2018, the European Commission announced a EUR997 million fine ($1.2 billion, 4.9% of 2017 turnover) against Qualcomm for violating anti-trust laws, by means of its deals with Apple.

Qualcomm, in turn, accused Apple of using the chip supplier's vast stable of technology innovations without proper compensation.

On 14 January 2019, Apple COO Jeff Williams said Apple wanted to use Qualcomm modems in the iPhone XS and XR, but Qualcomm refused to sell them after Apple sued over its licensing practices. This led to Apple using Intel modems in place of Qualcomm's.

Following the lawsuit settlement, Intel issued a statement announcing its intention to exit the 5G smartphone modem business and "complete an assessment of the opportunities for 4G and 5G modems in PCs, Internet of things devices and other data-centric devices".

Intel, nonetheless, points out it will continue to invest in its 5G network infrastructure business.

It notes the company will continue to meet current customer commitments for its existing 4G smartphone modem product line, but does not expect to launch 5G modem products in the smartphone space, including those originally planned for launches in 2020.

"We are very excited about the opportunity in 5G and the 'cloudification' of the network, but in the smartphone modem business, it has become apparent there is no clear path to profitability and positive returns," says Intel CEO Bob Swan.

"5G continues to be a strategic priority across Intel, and our team has developed a valuable portfolio of wireless products and intellectual property. We are assessing our options to realise the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world."

Intel expects to provide additional details in its first quarter 2019 earnings release and conference call, scheduled for 25 April.

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