UPDATED 20:36 EDT / APRIL 16 2019

INFRA

Intel exits 5G smartphone modem business hours after Apple and Qualcomm settle

Intel Corp. is exiting the 5G smartphone modem business in what seems to be a planned reaction to the news earlier today that Apple Inc. and Qualcomm Technologies Inc. have settled their long-running legal dispute.

Intel made the announcement late today, just hours after Apple and Qualcomm said they had settled their multibillion-dollar legal dispute over mobile modem chip technology. The companies intend not only to drop all legal action against one another, but also to resume a business relationship that should see Qualcomm emerge as Apple’s main supplier of modem technology once more.

In trading Wednesday, Intel’s shares were rising about 3.5%.

The deal is bad news for Intel because the chipmaker had become the main beneficiary of that dispute, replacing Qualcomm as the main supplier of Apple’s modem chips. But Intel’s inability to keep pace with Qualcomm on the 5G development front may well have forced Apple’s hand, since the iPhone maker was faced with the prospect of delaying the launch of its first 5G-capable handsets until 2021.

With Apple and Qualcomm signing a six-year licensing deal in addition to a “multiyear chipset supply agreement,” it looks as if Intel’s 5G chips are now surplus to requirements, and that may well have forced Intel’s hand.

“This is bad news for Intel’s ambition to be a key handset supplier, and it looks like the rumors [about its 5G development issues] were true,” said Holger Mueller, principal analyst and vice president of Constellation Research Inc. “On the flip side, Intel has the resources to get back into 5G with an acquisition or even organically in a later phase. Or it may even sit out 5G and come back with 6G.”

In the meantime, Intel said it will now assess the opportunity for 4G and 5G modems in personal computers and “internet of things” devices. The company will also step up its efforts in its 5G network infrastructure business, it said.

“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,” Intel said in a statement.

“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 that there is no clear path to profitability and positive returns,” added Intel Chief Executive Officer 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 realize the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world.”

In any case, and contrary to what many may have expected, Intel is unlikely to be too perturbed about losing the 5G smartphone race as it still has far more profitable businesses to fall back on, another analyst said.

“I am surprised, but then again Intel has been telegraphing this for a while,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “In its data-centric day, 5G was discussed but datacenter, edge and network transformation were the drill-downs. There’s actually more business in those areas than in modems, so I think it was the right decision.”

Intel may also be planning to focus on more specialized chips such as field-programmable gate arrays, if its latest acquisition is anything to go by. Earlier today, it announced it’s buying Omnitek B.V., which is a British company that designs programmable chips for visual processing tasks.

FPGAs are designed to accelerate specific kinds of workloads by being reprogrammed after manufacturing. Omnitek has created designs for more than 220 FPGA cores plus the accompanying software needed to program them. This technology, plus Omnitek’s 40-odd employees, will be absorbed by Intel’s Programmable Solutions group.

Omnitek’s IP is used for applications with heavy visual processing requirements, such as video conferencing, projection and display and medical vision systems. The British firm has also created FPGA designs for use in artificial intelligence inferencing.

“Omnitek’s technology is a great complement to our FPGA business,” Dan McNamara, senior vice president of the programmable solutions group at Intel, said in a statement. “Together, we will deliver leading FPGA solutions for video, vision, and AI inferencing applications on Intel FPGAs and speed time-to-market for our existing customers while winning new ones.”

The Omnitek acquisition should help Intel to cement its lead in a growing market for FPGAs that was established when it acquired Altera Corp. for $16.7 billion back in 2015. That acquisition served as the foundation of of Intel’s programmable solutions business. Intel has since launched its Agilex FPGAs based on Altera’s technology, which integrate analog, memory, custom computing, custom I/O and embedded application-specific integrated circuits and are built using a 10-nanometer process.

“FPGA devices play an increasingly critical role, often complementing other processing architectures, and Intel is at the center of this revolution,” Omnitek CEO Roger Fawcett said in a statement.

Photo: Isriya Paireepairit/Flickr

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