Apple and mobile chip maker Qualcomm have settled a bitter financial dispute around some of the technology that enables iPhones to connect to the internet.
The surprise truce announced Tuesday came just as the former allies turned foes were facing off in a federal court trial that was supposed to unfold over the next month in San Diego. The resolution abruptly ended that trial, which also involved Apple's key iPhone suppliers.
The deal requires Apple to pay Qualcomm an undisclosed amount. It also includes a six-year licensing agreement that likely involves recurring payments to the mobile chip maker.
This news was soon followed by Intel’s official announcement that it will be exiting the 5G modem business for smartphones. Instead, the chip maker will focus on making modems for PCs and smart home devices.
These developments on Wednesday have changed the dynamics of the global 5G market. This was needed at the earliest to get things in order, especially for Apple, which has been grappling with issues in getting someone to make 5G chipsets for iPhones that are unlikely to come out before 2020 anyways.
The company does not expect to launch 5G modem products in the smartphone space, including those originally planned for launches in 2020.Intel Statement
However, with Intel closing shop Apple will have no option, but to rely on Qualcomm and its 5G modems for iPhones, unless Huawei’s proposal to sell its 5G chipset is welcomed by both Apple and the US government (highly unlikely).
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.Bob Swan, CEO, Intel
This week could have a big impact on the global scenario of how and when 5G networks are likely to go mainstream, with most OEMs waiting for Apple to join the ranks, even though multiple phone makers, as well as Qualcomm have made their respective 5G-centric announcements this year.
Neither Apple nor Qualcomm would comment beyond a brief statement announcing they had resolved their differences. Details about how much Apple and its iPhone suppliers will be paying Qualcomm could emerge in court documents or when the companies announce their latest financial results.
The dispute was clearly beginning to hurt all parties involved, motivating them to settle, said technology industry analyst Patrick Moorhead of Moor Insights & Strategy.
"Both Apple and Qualcomm got deeper into this than they wanted to," Moorhead said.
Qualcomm also held another bargaining chip: It makes the modem chips needed for future smartphones to work with the next generation of high-speed wireless networks known as "5G." Two of Apple's biggest rivals, Samsung and Huawei, are already getting ready to introduce 5G models. The iPhone would have been at a disadvantage if it didn't have a pipeline to Qualcomm's chips.
Falling behind the competition isn't something Apple can afford with its iPhone sales already falling .
With all complications settled between Apple and Qualcomm, Intel out of the picture for 5G chipsets on mobile, the world could finally expect some movement in the connectivity era.
(With AP inputs)
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