Why did Apple (AAPL) settle a dispute that had dragged on for two years with Qualcomm (QCOM) now?
How about because troubles at Intel (INTC) threatened to leave Apple without the 5G modem chips it needed for a new 5G iPhone? And that threatened to put Apple a year or more behind its competitors in rolling out a competitive 5G iPhone. And because Apple knows that the transition between standards–to 4G from 3G, for example, have in the past disrupted the smart phone market enough to send market leaders from first to worst? No CEO with any memory of the history of the cell phone industry can help but remember that Motorola and Nokia at one point in the past led the sector.
Here’s the competitive problem that Apple faced. Qualcomm is already shipping 5G chips to the makers of some devices today. Apple was hoping that Intel would develop and bring to market a 5G modem that would let Apple avoid that it regards as exorbitant licensing fees charged by Qualcomm. But for months industry rumors have said that Intel was way behind schedule in taking its 5G modem chips to full production. And speculation has been rising that the Intel delays would leave Apple badly lagging competitors such as Samsung in getting a 5G phone to market. That delay, some on Wall Street have projected, could be enough to put Apple’s 5G iPhones as much as a year behind competitive products. With Apple already facing slowing growth in iPhone sales, I think you know exactly how attractive Apple found that possibility.
Those stories about Intel’s problems with its 5G modem chips got confirmation when shortly after the news of the Apple-Qualcomm settlement, Intel announced that it was pulling out of the 5G modem market. To me it looks like Intel decided it had better (potentially more profitable) products to work on than a 5G modem chip that would trail Qualcomm and Samsung to market.This news makes a great lead in to my next post in my Special Reports 5 Disrupted Sectors and 5 Profit Winners from Disruption. Next up in that series: 5G. Later tonight.
