As was reported with great fanfare by Forbes, Apple has purchased the 5G modem business from Intel. The article focuses on how this new functionality gives Apple a sort of leg up as it now has even more verticality in its supply chain. This should give the company a bit more ability to control for component prices as it now has captive capacity that it can completely earmark for itself as well as to use as a tool against Qualcomm pricing.
There’s another story here that I think people are not picking up. There could be an alternate story that goes like this, “Intel exits from 5G modem industry.”
Why is that interesting? First, Intel usually does a pretty good job of exiting industries and product lines that look like they’re becoming commodity. Of course there’s been some bungles in the past but generally they have a good read on such things.
The interesting aspect is what made Intel sell? The easy answer was that Apple way overpaid in Intel’s eyes. Intel could have done the calculus and came to the reasoning that the price offered by Apple would constitute a better return than what they’re anticipating in the market for the next few years. Apple could have desired the division much more than Intel as it would give them the aforementioned control that they like with suppliers. The extra cost may be worth it for them.
Another aspect is that Intel may not have had the opportunity to control the intellectual property properly enough to ensure longevity in the market – or more to the point, control prices in the market. It’s known that at least Qualcomm, Broadcom and Xilinix have competitive products. That’s some big players who could also put pressure on prices. Best to focus on markets Intel can control rather than just participate.
Perhaps too, that Intel may not have been the winner in the opening rounds of who wins the OEMs. All of the largest players in this case have chosen a 5G chip dance partner leaving Intel at the punch bowl. If this is the case – and all this is postulation on my part – then 5G is decided and will be coming to everything much faster than people are letting on.