Intel said that it would pull out of the increasingly cutthroat market for modem chips used by smartphones to tap into cellular networks. Tuesday's announcement came hours after Apple said that it had stamped out its ongoing legal conflict with Qualcomm over patent royalties and agreed to a long-term chipset supply deal. The agreement opens the door for Apple to resume using Qualcomm's cellular modems in future flagship iPhones, including 5G models.
Robert Swan, Intel’s C.E.O., said in a statement that "in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns." Intel said that it would meet its current commitments to customers using its 4G modem chips in phones. But it no longer plans to sell 5G modems for the smartphone space. The company's XMM 8160 5G modem was set to start shipping to customers before the end of 2019.
Intel said that it would assess the potential for 4G and 5G modems in personal computers, Internet of Things devices and other systems such as cars. Intel will also continue to invest in its 5G network infrastructure business. “5G continues to be a strategic priority across Intel, and our team has developed a valuable portfolio of wireless products and intellectual property," Swan said in a statement. "We are assessing our options."
Around 1.395 billion phones are projected to be shipped in 2019, and 5G shipments are estimated to be 0.5% of the total, according to IDC. But by 2023, 5G smartphones will represent 26 percent of all shipments, with 3G shipments dropping from around 4 percent to 2.2 percent of the total market. In addition, 4G smartphones are projected to have 95.4 percent market share in 2019, and 71.4 percent of the 1.542-billion-unit market in 2023.
"2019 will be surely marked as a year of modernization in the smartphone market," Sangeetika Srivastava, senior research analyst with IDC, said in a statement.
Intel's chips are today used in all the latest iPhones. Last year, Apple ousted Qualcomm's modems from its phones in favor of Intel's amid escalating legal disagreements. Apple accused Qualcomm of using illegal patent practices to overcharge royalties and maintain its stranglehold on the modem market. Apple responded by stopping royalty payments to Qualcomm, which countered by arguing that Apple had used its technology without paying for it.
On Tuesday, the legal conflict simmered down. Apple announced a “multiyear chipset supply agreement” with Qualcomm and a licensing deal for Qualcomm's intellectual property, including its standard essential patents. Qualcomm's 5G modem are considered the industry's most advanced, while Intel has been struggling with its 5G modem development. That probably pushed Apple to make peace with Qualcomm, industry analysts say.