Intel Made an Abrupt Move to Exit the 5G Modem Business, but Analysts Have Praised the Decision
In a surprise and somewhat unexpected move this week, Apple and Qualcomm extended an olive branch towards each other and entered a six-year patent licensing deal. Soon afterward, Intel announced that it is exiting the 5G modem business which might make you think that Apple’s and Qualcomm’s reconciliation worked out against Intel. It might have been quite the contrary, as Intel’s stock actually gained 3.7 percent following the news. In fact, the optimism of Wall Street analysts implies that the Cupertino giant’s and Qualcomm’s patch up may prove to be a blessing in disguise for the company.
Intel Can Now Focus More on Its Profitable Chip Business, With Analysts Stating That the Latest Move Will Help Allow the Company to Make Future Decisions More Maturely
When Apple had a falling out with Qualcomm, Intel became the beneficiary, winning all the modem orders, as evident in the 2018 iPhone lineup. However, the company was said to be struggling with 5G modems and this also apparently distracted it from its core, successful business which is making processors chips for PCs, notebooks, and servers. Moreover, Intel’s modem business looked like it was never able to make a decent amount of money. Sure, having a client such as Apple is a lucrative opportunity, but the company was reported losing approximately $2 billion annually in this venture.
Intel’s current CEO Bob Swan, who assumed office in January, recently said in a press release that though the company is excited about 5G, it doesn’t think that its smartphone modem business would be profitable. The Wall Street reacted positively to the news because now that Intel has exited the 5G smartphone business, it can go back to concentrating on the profitable x86 chip business.
Although Lenovo and other partners pushed out x86 architecture-based smartphones in the market, they were never a success and although there appeared to be some hope in the tablet market, the costs seemed to outweigh the benefits. It is worth reiterating that Intel hasn’t given up on its 5G dreams, it has simply sidelined itself from the smartphone market. Earlier this year, the company introduced an SoC platform called Snow Ridge which would make 5G base stations more intelligent and allow for low-latency applications.
Analysts believe that leaving the smartphone 5G modem market was the right business decision for Intel and it will help the company be more disciplined in the future. However, the company will face fierce competition from AMD, but all in all, analysts appear to believe that Intel is on the right track.