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Illustration: Rebecca Zisser/Axios

Apple's surprise deal with Qualcomm not only resolved one of the biggest legal disputes in the tech industry, but changed the balance of power in the chip industry.

What's happening: Just hours after announcing the settlement — which included a multiyear agreement for Qualcomm to supply chips to Apple — Intel said it was scrapping plans to release a 5G modem chip next year.

  • Intel added it will re-evaluate whether there's enough business making modem chips for PCs and internet-of-things devices to justify continued investment.

Why it matters: The shakeup comes as the U.S. seeks to increase its role in 5G and future cellular generations.

  • The deal strengthens Qualcomm's position as the dominant U.S. player in 5G but likely diminishes the chances that Intel remains a significant player going forward.
  • Given that all of the key equipment suppliers (Ericsson, Nokia, Samsung and Huawei) are from outside the U.S., chips remain the country's primary influence in the cellular industry.

The big picture: This is another big setback for Intel, which had already missed out on being a player making the core processor for phones, despite spending several years and billions of dollars in a catchup effort.

  • Modems gave Intel a shot to win a smaller, but still significant role in the iPhone.
  • Intel had been gaining ground amid Apple's dispute with Qualcomm.
  • In 2017, Apple split the iPhone modem chip business between Intel and Qualcomm and, for last year's new iPhones, Apple gave the entire business to Intel.

There had been reports that Intel was behind on the 5G chip, though. If true, that certainly could have been a key factor in pushing Apple to the bargaining table with Qualcomm.

Yes, but: In settling with Qualcomm and agreeing to a new chip deal, Apple practically guaranteed a dim future for Intel in modem chips. Most other companies prefer to get the modem and core processor in a single chip, something Intel neither offered nor had plans to do.

  • Intel's exit isn't ideal for Apple either, as the company would prefer to have two modem chip suppliers.

What they're saying:

"Given the announcement’s timing, it’s clear that Intel management lost interest in — or couldn’t deliver — mobile 5G, which forced Apple to settle with Qualcomm, not that Apple’s settlement forced Intel to exit 5G modems."
— Tech analyst Avi Greengart, on Twitter

What's next: The big questions are around the future of Intel's modem business.

  • If Intel jettisons it, does Apple emerge as a potential buyer in hopes of one day making its own modem chips?
  • Or, having agreed to pay Qualcomm for its patents, does Apple relent and get all its modem chips from them as well?

Go deeper

4 mins ago - World

Biden's ambassador nominee: "China is not an Olympian power"

Nick Burns testifying before the Senate Foreign Relations Committee. Photo: Sarah Silbiger/Bloomberg via Getty Images

President Biden's nominee to serve as ambassador to China delivered a stark assessment of the challenges the U.S. faces in confronting Beijing, but stressed that the rising superpower is "not all-powerful" and the West retains "substantial" advantages.

The big picture: Nicholas Burns, a retired career diplomat and former U.S. ambassador to NATO, used his confirmation hearing Wednesday to echo the growing bipartisan consensus that China poses "the greatest threat to the security of our country and the democratic world" in the 21st century.

Scoop: U.S. and Israel to form team to solve consulate dispute

Secretary of State Antony Blinken (left) and Israeli Foreign Minister Yair Lapid (right) meet in Washington. Photo: Andrew Harnik/Pool/AFP via Getty Images

The U.S. and Israel are planning to form a joint team to hold discreet negotiations on the reopening of the U.S. Consulate in Jerusalem, Israeli officials say.

Why it matters: The consulate handled relations with the Palestinians for 25 years before being shut down by then President Donald Trump in 2019. Senior officials in Israeli Prime Minister Naftali Bennett's government see the consulate issue as a political hot potato that could destabilize their unwieldy coalition.

Nikolas Cruz pleads guilty to Parkland school shooting

Parkland school shooter Nikolas Cruz at the defense table during jury selection at the Broward County Courthouse in Fort Lauderdale, Fla., on Oct. 6, 2021. Photo: Amy Beth Bennett/South Florida Sun Sentinel/Tribune News Service via Getty Images

Nikolas Cruz on Wednesday pleaded guilty on all counts for carrying out the 2018 shooting at the Marjory Stoneman Douglas High School in Parkland, Fla., that left 17 people dead, including 14 students and three staff members.

Driving the news: Cruz, 23, pleaded guilty at a hearing on Wednesday to 17 murder counts and 17 counts of attempted first-degree murder for carrying out the deadly shooting.