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18 April 2019

We called it, Qualcomm victorious in iPhone battle – Intel never up to 5G job

For the first time in eight years, Apple is free from all patent litigation plights with a major technology firm – breaking bread with Qualcomm this week after settling with Samsung last year. As unprecedented and unexpected as the laying down of weapons might seem, it signals something Faultline predicted long ago – that Apple could never gain a significant foothold in 5G without Qualcomm.

News of the dismissal of all litigation between the two companies, which includes an undisclosed payment to Qualcomm and the signing of a six-year chipset license agreement, was shortly followed by Intel controversially canning its 5G mobile modem exploits to focus on developing 5G modems for PCs and smart home devices, as well as continuing with 3G and 4G modems. There is no doubt Intel’s announcement triggered the beginning of the end in the ongoing Apple-Qualcomm debacle.

Intel’s supposed shortcomings in the development of a sufficient modem for the first 5G iPhone have leaked out in recent reports since Chipzilla became the sole smartphone modem supplier last year. Ultimately and against the vast majority of industry odds (excluding ours), it means a Qualcomm Snapdragon 5G iPhone should arrive by 2020.

Faultline initially doubted Intel’s ability to build an acceptable 5G modem within 18 months of Samsung and Qualcomm and we actually went as far to suggest it might never be able to build one outright – so we were right on the money again. Apple would have been waiting until at least 2020 for an Intel part which only existed as a prototype which we now know will never see the light of day. This is essentially what the ongoing FTC court case concerns – Qualcomm having a part ready to rumble, while the only other chip firms able to supply such a component are Samsung, or from China (although Trump’s trade war virtually blocked that route), or – more unlikely still – from startups.

Rewind to November 2017 when we ran the headline “Split from Qualcomm could leave Apple in 5G dust” when the point was hit home how Qualcomm has been making waves in modem development, reaching Gigabit download speeds in lab environments using its X50 5G modem chipset in combination with its SDR051 TF transceiver chip – showing how Qualcomm aims to supply multiple parts of the 5G ecosystem. In past eco-system ramp ups, it has been 9 months to 12 months ahead of rivals with early silicon.

Then in February this year, we updated readers on the proceedings between Qualcomm and the FTC after Apple and Qualcomm had each presented their closing arguments. Faultline concluded that the lengthy discussion of events within the courtroom at the time combined to imply an inevitable outcome in which Qualcomm would be let off the hook.

Now that’s the smugness out of the way, we promise, but it’s a fine feeling knowing our readers continue to be ahead of the curve.

A value hasn’t been publicly placed on the payment received by Qualcomm, but we estimate Apple has coughed up somewhere in the region of $10 billion to $12 billion. Either way, Qualcomm’s next set of financial results should include a mysteriously large lump on the books. But even $12 billion could be a smaller sum than what Apple might have had to recoup from developing a 5G modem from scratch and as many modem casualties in the past have illustrated, from Broadcom to Nvidia to Freescale, it is tough to beat Qualcomm at its strongest game.

“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,” Intel CEO Bob Swan said in a statement. “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.”

The settlement comes only a month after Qualcomm secured its third and most significant win against its once fierce adversary Apple, with a jury in the US District Court of California ruling against the iPhone maker and ordering it to sign over a check for $31 million, following similar decisions in Germany and China this year. At the time, Qualcomm mocked Apple in a statement saying, “we are gratified that courts all over the world are rejecting Apple’s strategy of refusing to pay for the use of our IP.” However, these patents are not related to modem processors and Qualcomm therefore highlighted they are not essential to practice any cellular standard.”

Just imagine an army of Apple lawyers twiddling their thumbs wondering what to do now and praying Apple’s now infamous legal spree is reignited soon, somehow. Indeed, even esteemed members of Apple’s own legal team may have fallen victim to the element of surprise given how lawyers were presenting closing arguments in a Southern California courtroom the day prior to the joint announcement from Apple and Qualcomm.