Intel to quit 5G modem effort after Apple reaches deal with Qualcomm

Intel is dropping its plan to make 5G cellular modems, with the announcement coming just hours after Apple reached a deal with rival Qualcomm to settle a patent dispute.

Why it matters: Apple had been giving Intel an increasing share of the iPhone modem business as tensions were ratcheting up with Qualcomm. However, as part of its settlement, Apple reached a multiyear deal to get chips from Qualcomm.

Intel, which currently supplies all the modems for the iPhone XS and XR, said it will "continue to meet current customer commitments for its existing 4G smartphone modem product line," but is assessing its options for the modem business and no longer plans to release a 5G modem next year as it had planned.

Apple had been expected to be the main, if not the only significant, customer for that modem chip. However, the deal with Qualcomm made it clear that the modem business opportunity with Apple was likely to shrink, if not go away entirely.

Intel says it will now explore whether there is enough of a business opportunity in selling 4G and 5G modems for computers and Internet-of-things devices while continuing to invest in making components for 5G network infrastructure.

What they're saying: “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.”

What's next: Intel said it would have more to say when it reports earnings April 25.