Intel quits modems as Apple and Qualcomm settle
It was shaping up to be the biggest technology lawsuit in years—Apple vs Qualcomm—a spat that started more than two years ago, when Apple refused to pay royalties for inventions that it says the company had nothing to with.
The background: Apple's suit was originally filed back in 2017 for $1 billion in rebates and allegations of anticompetitive practices. Over that time, the spat slowly escalated from hostile word-slinging to Apple actually dropping Qualcomm as a modem supplier altogether in favor of Intel, before coming to a sudden end overnight.
After all of this, Apple appears to have finally called a truce: it's settling with Qualcomm, dismissing all litigation worldwide, and even going as far as paying the company for its licenses. Why would this happen, given how far this spat had gotten? In a nutshell: Apple simply has no choice.
We knew that Intel's modems, found inside the latest generation of iPhones, generally perform worse across the board than any Qualcomm models used in the past on both throughput and signal stability. On top of that, Apple's reliance on Intel as sole supplier caused other problems: Intel is really, really slow at innovating and struggling with chip development across the board and was hindering the development of future products.
It's been rumored that the Intel relationship has been strained for some time. Not only is Intel years behind Qualcomm on the development of 5G modems that appeared to be disrupting Apple's transition to the next-generation network technology, it's struggling to fulfill the current generation as well.
Intel's poor performance as a partner and technology supplier is at the core of this settlement—but the reason we can be confident about that is the bombshell that dropped just hours after the settlement: Intel will pull out of modem development entirely, discontinuing its research and even going as far as saying it would not develop products "expected in 2020."
That 2020 product is clearly the next-generation iPhone, which was expected to ship with 5G. With Intel planning to drop out of the game, Apple clearly saw the writing on the wall and realized that there was nowhere to run.
Rumors swirled in recent years that Apple is working on its own modems in-house—and a steady stream of ex-Intel engineers joining the company is evidence of that—but it's years away from something stable or effective enough to compete with the wider smartphone market. Apple's products might be magic, but the process of inventing chip fabrication from scratch isn't: it takes years to perfect.
Qualcomm and Intel had an effective duopoly on the market, but now, with Intel out of the game, Qualcomm is the only player left. Apple, not ready to switch to its own modems in the near-term, was faced with a choice: stick with Intel, or bite the bullet and pay the Qualcomm tax. The latter is logical, and reflected in the length of the licensing settlement: it's committed to a six-year licensing period of Qualcomm technology.
That six-year period? More than enough time to build and ship a generation or two of 5G 'Apple' modems, even quietly testing them in a place like the iPad, before switching the cash cow—iPhone—across to in-house technology, increasing the company's margins (and independence) further.
This is a weird turn of events given how hostile things had gotten. Qualcomm was successful in winning rulings as far as banning the import of iPhones in some countries, and the companies were openly hostile regularly in public communication about the subject.
But, in a game where there's few players, angry words are a negotiating tactic, and neither Apple nor Qualcomm wanted their skeletons dragged out of the proverbial closet in a trial. A settlement buys Apple time to iterate, and perfect, its own technology. What are a few angry words when you've won billions of dollars of business back?
This only buys Qualcomm time, but may end up helping lengthen its lead again as well. There's no more Intel barking at the door, and Apple can go back to using reliable modems again. It's a win-win, for now, but I doubt Apple is the only phone maker investing heavily in breaking away from the company: the damage is done.
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