Intel will abandon the market for smartphone 5G modem chips, the company said on Tuesday. The news came on the same day that Apple, Intel's customer for 5G modem chips, settled a lawsuit with Qualcomm relating to the technology. The move marks the first big strategy change by new Intel CEO Bob Swan, who took the reins in January, and it represents a remarkable turn of events for the company that once provided the silicon in the majority of consumers' computing devices. Shares of Intel were up 4% in after hours trading following the announcement. 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 risk, 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 chips were once inside 8 out of 10 PCs. Now it's giving up completely on being inside smartphones. 5G, or fifth generation, is the next major evolution in wireless technology. Compared to today's 4G wireless networks, 5G networks are expected to provide blazing fast data speeds for consumers. But smartphones will require new chips to take advantage of the forthcoming 5G networks, setting the stage for an upgrade cycle that could boost revenues for chipmakers and device companies. A journalist uses his mobile phone to take a picture of the 5G logo prior to the auction of spectrum for 5G services at the Bundesnetzagentur head quarters in Mainz Reuters 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. Intel was famously slow to adapt its business from PCs to smartphones, and had been fighting an uphill battle trying to claw back market share in the mobile market for years. The change announced on Tuesday is a recognition that fighting for modems was not worth the effort, given the massive, hundreds of billions of dollar opportunity on the datacenter side, where Intel is much stronger, said Moorhead. Here is Intel's full announcement: SANTA CLARA, Calif., April 16, 2019 – Intel Corporation today announced its intention to exit the 5G smartphone modem business and complete an assessment of the opportunities for 4G and 5G modems in PCs, internet of things devices and other data-centric devices. Intel will also continue to invest in its 5G network infrastructure business. 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. "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," said Intel CEO 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." Intel expects to provide additional details in its upcoming first-quarter 2019 earnings release and conference call, scheduled for April 25.<doc-sep>Intel this afternoon announced plans to exit the 5G smartphone modem business to instead focus on opportunities for 4G and 5G modems in PCs, internet of things devices, and other data-centric devices. The announcement comes just hours after Apple and Qualcomm reached a settlement and agreed to drop all litigation against one another. Intel said that it will continue current customer commitments for existing 4G smartphone modems, but it will not launch 5G modems in the smartphone space. In a statement, Intel CEO Bob Swan said that there is "no clear path to profitability and positive returns" in the smartphone modem business. "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," said Intel CEO 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." Rumors earlier today suggested Apple would use Qualcomm's 5G chips in its 2020 iPhones, and now it's apparent that the Cupertino company has no choice with Intel opting to pull out of the chip business all together. Following Apple's legal battle with Qualcomm, Intel was the sole supplier of modem chips for the 2018 iPhone lineup and planned to provide 5G chips for Apple in 2020. Intel had been working on the XMM 8160 5G chip, which was going to be used in the 2020 ‌iPhone‌ lineup. Rumors earlier this month indicated the relationship between Apple and Intel had grown tense as Intel began missing developmental deadlines on the 5G chip, leading Apple to lose confidence in Intel's ability to provide the chips in time for a 2020 5G iPhone launch. Apple appears to have been left with no choice but to settle with Qualcomm in order to be able to roll out a ‌5G iPhone‌ in 2020 as planned. Apple's settlement with Qualcomm included a six-year licensing agreement and a multiyear chipset supply agreement. Apple is said to be sticking with Intel chips in 2019 because it's too late for the company to adopt Qualcomm's chips, but in 2020, Qualcomm may be Apple's only chip supplier once again. To reduce its reliance on Qualcomm, Apple is working on its own chip technology, but Apple's own modem chips aren't expected to be ready until 2021.<doc-sep>Intel Intel will no longer be working on 5G chips for phones, leaving Apple with only one supplier for its iPhones, Qualcomm -- the same company that it was battling in court until midday Tuesday. Intel late Tuesday said it plans to cease working on modems for 5G, the next-generation of wireless technology expected to supercharge your mobile connection. It had been working on a processor for Apple, with the chip expected to be in iPhones in 2020. Lately there have been worries the chip wouldn't be ready until iPhones released in 2021. "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 press release. Its only customer in modems is Apple. Now playing: Watch this: We tested Verizon's new 5G network The announcement follows news from earlier Tuesday that Apple and Qualcomm had reached a settlement in their battling over licensing royalties. The two sides announced the surprise agreement through a joint press release Tuesday at the same time lawyers presented opening arguments in a courthouse in Southern California. Apple and its contract manufacturers had given their statements, and Qualcomm's head lawyer had nearly finished his remarks when the courtroom buzzed with the unexpected news. In a statement, Intel added that it will "complete an assessment of the opportunities for 4G and 5G modems in PCs, internet of things devices and other data-centric devices." It also said it will "continue to invest in its 5G network infrastructure business." "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. Apple vs. Qualcomm The writing was on the wall after Apple and Qualcomm settled, ending the two-year battle. Apple in January 2017 had accused Qualcomm of anticompetitive practices that have raised chip prices, restricted competition and hurt customer choice. Qualcomm, the world's biggest mobile chipmaker, had countered that the iPhone wouldn't be possible without its technology, and it deserved to be paid for its innovation. The settlement marks a big win for Qualcomm, which could have been forced to change its entire business model had it lost to Apple. The agreement is also a victory for consumers, who will once again have access to fast Qualcomm modems -- including ones already compatible with existing 5G networks. "With the market for 5G accelerating, the need to guarantee a 5G iPhone in 2020 clearly proved a powerful motivator for a settlement," CCS Insights analyst Geoff Blaber said. "Commercial pragmatism ultimately won." But with Intel exiting the 5G modem business, Apple is once again left with only one modem supplier, Qualcomm. Apple makes its own applications processor -- the brains of the iPhone -- but it relies on third-party chips for network connectivity. From the iPhone 4S in 2011 to the iPhone 6S and 6S Plus in 2015, the sole supplier for those chips was Qualcomm. The following year, Apple started using Intel modems in some models of the iPhone 7 and 7 Plus, but it still used Qualcomm in versions for Verizon and Sprint. It continued that trend in 2017, but Apple's latest phones -- the iPhone XS, XS Max and XR, now only use Intel 4G chips. Apple blamed Qualcomm, but now that the two companies have settled their patent disputes, Qualcomm will again provide chips for Apple. For Apple, it's likely too late to use Qualcomm chips in its iPhones coming later this year. But it's believed the iPhones in 2020 will have Qualcomm's 5G modems. It's expected that every major flagship Android phone by the end of this year will have 5G. An Intel spokesman declined to say if Intel planned to exit the business before the settlement or because of the new agreement between Apple and Qualcomm. Investors seemed to approve of Intel's decision. Shares in the chipmaker jumped almost 4% to $58.97 in after-hours trading. "Without Apple, Intel's phone modem business is bereft of options," said Charles King, an analyst with Pund-IT. "The settlement and licensing agreement left Intel without a clear way forward in handsets. The company is really better off focusing its energies and investments on 5G infrastructure and data center solutions." Originally published April 16, 4:39 p.m. PT. Updates, 5:09 p.m.: Adds Apple vs. Qualcomm details and other background; 5:23 p.m.: Adds analyst comment; 5:32 p.m.: Adds Intel share price; 6:33 p.m.: Adds analyst comment.<doc-sep>Bob Swan, then-interim chief executive officer and chief financial officer of Intel Corp., reacts during the inauguration of the company's research and development facility in Bengaluru, India, on November 15, 2018. Intel said on Tuesday that it's dropping out of the 5G smartphone market just hours after Qualcomm and Apple announced a six-year licensing agreement as part of a royalty settlement. "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 late Tuesday. Intel shares rose about 4 percent to $58.97 in extended trading after the announcement. The company said it will provide additional details about its plans in its earnings report on April 25. In January, Intel named Robert Swan as permanent CEO, ending a months-long search following the ouster of Brian Krzanich. It's up to Swan to find markets that work for Intel as sales of PCs continue to slide. The company said that in addition to exiting 5G smartphones, it's assessing its future in so-called internet of things devices, or the growing number of gadgets that are connected to the web. In the smartphone market, "it has become apparent that there is no clear path to profitability and positive returns," Swan said in the statement. The company has warned in the past that margins are lower in the device market than in data centers. Intel said it will keep investing in its 5G network infrastructure business. Earlier in the day, Qualcomm shares surged 23 percent following the disclosure that Apple will pay the chipmaker as part of a settlement. According to Qualcomm, a new license between the two companies is six years, with a two-year option to extend. Qualcomm is the dominant independent supplier of 5G modems, while Samsung and Huawei make processors for their own devices. --CNBC's Jordan Novet contributed to this report. WATCH: Intel shares dip on downgrade from Wells Fargo<doc-sep>
Just hours after Apple’s settlement with Qualcomm, Intel has announced that it is exiting the 5G smartphone modem business. In a press release, the company says that it will instead focus on 5G network infrastructure. Intel says that it will “complete an assessment” of the opportunities for 4G and 5G modems in PCs, internet of things devices, and other data-centric devices. It will also continue to “meet current customer commitments” for its existing 4G smartphone modem efforts – such as the iPhone. Going forward, however, Intel says it does not expect to launch 5G modem products for smartphones, including those originally planned for 2020: Intel Corporation today announced its intention to exit the 5G smartphone modem business and complete an assessment of the opportunities for 4G and 5G modems in PCs, internet of things devices and other data-centric devices. Intel will also continue to invest in its 5G network infrastructure business. 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 CEO Bob Swan said that it is clear there is no “path to profitability and positive returns” for Intel in the smartphone modem business: “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,” said Intel CEO 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.” Apple was widely expected to use Intel’s 5G modems with the iPhone starting in 2020. A report recently suggested that Intel was struggling to meet deadlines and risked missing the iPhone’s 2020 window. The report elaborated on the strain the modem business put on Intel, noting that data infrastructure and other businesses are more profitable for the company. Apple is now expected to use Qualcomm’s 5G modems with the iPhone in 2020. It now seems as if Intel bailed out of the modem business, forcing Apple to make a decision in its legal battle with Qualcomm. Read the full press release from Intel here. FTC: We use income earning auto affiliate links. More. Subscribe to 9to5Mac on YouTube for more Apple news: