Intel is quitting the 5G smartphone modem business: 'There is no clear path to profitability and positive returns' (INTC, AAPL, QCOM)

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Chipmaker Intel said on Tuesday that it is exiting the 5G modem business, effectively ceding the market for smartphones on the eve of what’s expected to be the biggest wireless market technology transition in years. 

The company said it will focus its 5G wireless efforts on network infrastructure. But, when it comes to the smartphone modem business, CEO Bob Swan said in a statement, “it has become apparent that there is no clear path to profitability and positive returns.”

Shares of Intel was up as high as 4% in after hours trading following the announcement.

The news came on the same day thatiPhone maker Apple and Qualcomm settled litigation involving 5G modems.

Apple had previously selected Intel to supply the modem chips for its future 5G smartphones. But Intel said in its announcement on Tuesday that it “does not expect to launch 5G modem products in the smartphone space.”

The timing of the Apple settlement and the Intel announcement did not appear to be a coincidence and was quickly remarked upon by industry observers. 

“We just don’t know which one came first,” said Patrick Moorhead, the president and principal analyst of Moor Insights & Strategy. 

“Did Apple say ‘Intel is too much, I need to go back with Qualcomm’ or was this Intel saying ‘This business isn’t great and I don’t want to pour more resources into it’?” Moorhead said. 

Intel appeared to be having trouble with its schedule for producing the 5G chips, Moorhead said. As a result, Apple was putting its iPhone business at risk if by relying on Intel for the modem chips.

“Qualcomm’s core business is modems and modem IP,” he said. “It’s their core business, it’s what they do.”

The news represents the first major strategy change by Swan sincetaking the reins as permanent CEO in January, after Brian Krzanich resigned following a company investigation into a past relationship with an employee.

Intel’s decision to pull the plug on modem chips means the company is effectively abandoning the market for smartphones, the most popular platform used by consumers for computing today. It’s a remarkable turn of events for a company that once provided the microprocessors at the heart of roughly 80% of the world’s PCs and was synonymous with consumer computing devices. 

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Source: businessinsider

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