Intel recently abandoned its plans to produce and sell 5G modems for smartphones after its main customer, Apple, announced on April 16 that it would resume using Qualcomm modems. Apple had previously used Qualcomm modems, but switched to Intel products solely due to legal disputes with Qualcomm over patents and high licensing fees. However, Intel's 5G progress is significantly behind its competitor, and Apple doesn't want to waste time and fall behind. Android-manufacturers due to their partner's unwillingness to master new technology.
Qualcomm has already released its first 5G modems, while Intel planned to begin production of the first units only in 2020, which, if the partnership between Intel and Apple were maintained, could lead to the emergence of iPhone 5G is about a year away from the first devices appearing. Android with support for the new communications standard. Worse still, analysts at UBS and Cowen warned that 2020 could prove to be a rather optimistic forecast for Intel, which will be completely out of step with reality.
Intel disagreed with the UBS and Cowen forecasts, but Apple's decision, which clearly prioritizes the speedy release of a new iPhone, rather than a victory in the legal battles with Qualcomm, suggests that the analysts were likely not far off the mark. This situation could be considered Intel's second failure in its attempts to enter the mobile market. Let's look at Intel's past failures and what they might mean for its future.
How Intel lost its chance in the mobile market
More than a decade ago, Intel said Apple wouldn't be able to sell significant volumes. iPhone, and therefore refused to produce processors for its first smartphone. Apple ultimately ordered processors from Samsung before developing its own A-series processors, which were ultimately manufactured by both Samsung and TSMC.
Then, Intel neglected the rapid growth of ARM, which licensed low-power chips to mobile chipmakers like Qualcomm. Intel actually had its own microarchitecture for ARM processors, XScale, but sold it to Marvell Technology in 2006. Intel then decided it could leverage its leading position in the PC and servers, which primarily uses x86 architecture instead of ARM to promote its Atom x86 processors for mobile devices.
Unfortunately, Intel x86 processors were not as power efficient as ARM processors, and mobile device manufacturers preferred battery life over performance advantages. As a result, customers turned to ARM chip makers such as Qualcomm and Samsung. Qualcomm soon integrated the modem and graphics core into an ARM chip in its Snapdragon processor family, which became a cost-effective all-in-one solution for most smartphone manufacturers. By the beginning of the new decade, ARM processors were used in 95% of all smartphones in the world, and Qualcomm became the largest manufacturer of mobile chips.
Instead of giving up, Intel tried to get back into the smartphone market by subsidizing hardware manufacturers that used Atom chips. Within three years, about $10 billion was spent on subsidies to occupy no more than 1% of the market. When Intel cut subsidies, OEMs, as expected, went back to ARM chips.
In mid-2016, Intel finally discontinued the Atom SoC for smartphones. In the same year, the company began shipping 4G modems to Apple, which distributed orders between Intel and Qualcomm. However, Intel's modems were noticeably slower than Qualcomm's, forcing Apple to limit the speed of the latter to eliminate differences between its own phones.
Therefore, it is not surprising that with the already emerging lag, Intel lost in the 5G race as well. The company clearly couldn't match Qualcomm's experience in this area, and Intel's constant problems with underproduction of chips on the 14nm process, which is used, among other things, by its own modems, only exacerbated the problem.
What does this failure mean for Intel?
Apple's decision not to partner with Intel comes as no surprise, but Intel's confidence in its path raises questions about the company's management.
On the other hand, Apple's decision could help Intel improve its 14nm shortage. Also, the loss of Apple as a customer for the company's future 5G modems should not noticeably affect its revenues, which are primarily focused on the PC market (52% of Intel's revenues in 2018), especially since production has not even begun yet. It could also cut spending on research and development, which used up nearly a fifth of Intel's revenue last year, and allow Intel to spend more money on promising technologies where the company hasn't lost the fight yet, such as self-driving cars.
Interestingly, shareholders and the market seem to be thinking in the same direction, given that the decision to stop supplying 5G modems caused a slight increase in Intel shares, instead of a seemingly expected fall, as analysts believe that this will allow the company to reduce unnecessary costs that reduce its net profitability.
Intel is not completely abandoning the development and supply of modems. The company is still planning to release 4G and 5G chips for PCs and IoT-enabled devices. However, the loss of Apple's orders was the company's second setback as it failed to gain a foothold in the huge smartphone market. Let's hope that Intel has learned its lesson and will focus more on innovation without betting on its default superiority of the competition, as it did with Atom.
Source: 3dnews.ru
