Apple in Advanced Talks to Buy Intel’s Smartphone-Modem Chip Business
wsj.com
wsj.com
To this day there's not a single Apple laptop that ships with built in 4G modems even though that would make sense from a functional point of view. I suspect the reason is not technical but related to IP and pushback from other players in the ecosystem (e.g. operators). As soon as you add 4G/5G to the mix, there are suddenly a lot of sneaky patents that come into play.
At least you can't tell me that nobody in Apple pondered the question "hmm I wonder which of our Mac Book Air customers would not like to be connected anywhere on this planet". The reason this is not a feature is that it would add a lot of cost related to patents and IP licensing. This deal might fix that partially. Software sims have been similarly difficult for the same reasons and another thing Apple has been pushing on lately.
Apple doing this stuff in house means they can push harder on this front.
Having the laptop battery and cooling would be much better
Except WiFi modems are cheap because there is lots of competition and most of the patents are easy to license, so everything has WiFi now.
I was in Phoenix AZ last week when it was 115F and my phone’s hotspot shut down because the phone got too hot.
Yes it was awful.
Even plastic clad android phones will get hot if you try and make a long phone call from BFE.
Any phone can do that, not only iPhones. How often are you on the move without a phone?
Also the battery argument is not so definitive since a laptop on 4G/5G would also consume battery. If you can connect your laptop to a wall outlet you can connect your phone too.
https://www.cnet.com/news/apple-wants-its-3g-macbook-prototy...
(Green and blue boards tend to be for production-ready prototypes, red is fairly hacked together.)
I believe the objections are 50:50 software-related and battery. How do you set suitable data usage thresholds on a Mac which is running over a 3/4/5G LTE network? The thermal performance of MacBook Pro is already weak at the high end and battery life suffers.
I would be surprised if, when Apple switches to its own power efficient chipset in its portable Mac line, they don't offer a BTO option which includes cellular capabilities through a built-in SIM.
Looking at the numbers here(1), this is not right. They sold ~46 millions iPhones, ~9 millions iPads for a rounded total of ~50 millions devices with a GSM modem. Meanwhile, they "only" sold ~5 millions Macs, which include all the laptops and desktop offerings. Therefore, adding a GSM device to all their mobile offerings would only mean ~10% increase in number of modems (assuming all of those 5 millions macs are actually laptops). I would "blame" the lack of such an offering on the same reason they don't offer many different ports, like headphones, non usbc usb, hdmi etc.
1. https://www.macworld.co.uk/news/apple/apple-financial-result...
I'm arguing that they already solved this issue, since they are selling so many devices with GSM modems. Unless you can provide documentation demonstrating otherwise, I am not going to believe their agreement is to use GSM modems only on iPhones and these particular models of iPads, but is to use GSM modems on whatever devices they see fit. I don't think Apple are that stupid to limit themselves like that.
Not to mention Smartphone, Tablet, and Other devices each have different royalty rate. Which means you cant use the same terms for your iPhone and use those for your iCars.
Quote: We broadly provide per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops, which effectively provide for a maximum royalty amount per device.
If you want a laptop but don't want to pay Apple prices, you can buy a laptop from Lenovo/Dell/Asus/you get the point.
If you want to play in the 4G/5G space you have to license Qualcomm's IP. They've been pretty aggressive about enforcing this. So aggressive in fact that they've been found guilty of anti-competitive behaviour by a US judge (in a case brought by the FTC), as well as by the EU (twice).
So yeah, in the face of that, it's difficult to argue that Apple's position - of selling premium devices in a competitive market - is in any way similar to Qualcomm's predatory tactics.
Now if you want to talk about the App Store on the other hand...
Quote: We broadly provide per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops, which effectively provide for a maximum royalty amount per device.
I suppose (guessing) if this was a SoC and there were no standard M.2 slots, then I guess I could see why Qualcomm would want some extra royalties in that case.
The technical issues are accommodating it with the design decisions made. Personally, I think it’s a smarter decision to make the iPhone/iPad pairing model low friction, as Apple has.
This is also a small/minority use case. LTE laptops are a very small product category — nobody wants to add a cellular plan. This feature will only matter if carriers start killing cable with millimeter wave 5G.
I do remember the royalty fees for Non-Smartphone ( Or Devices with only Data line ) were cheaper. But together it would still easily be $30+.
For example, 30 minutes of TV every other day is already pushing 8 Gb...
Right now there's a 5G land-grab going on, with hundreds of millimeter-band 5G poles being dumped everywhere. I assume that's for a wireless fixed ISP service, as it doesn't add value for normal mobile service.
Here's a fun anecdotal story. Me and my partner both have iPhone 7+ devices and the same carrier. I get 2 bars of 4G signal and she gets none inside our apartment. She has to walk outside to take calls. I couldn't understand how this was possible but after some research I discovered that my iPhone has a Qualcomm modem and hers has an Intel modem.
Say what you want about Qualcomm but they make the best modem in the business. The reason I have not upgraded is quite simply because Apple no longer make a phone with a Qualcomm modem and I won't be able to get signal where I live.
Obviously, i'm an edge case. But for the average person paying $1500 for the "Best smartphone in the world" it sure seems crazy that they're also getting the worst modem in the world packaged inside it so Apple can save a few dollars on the cost of the unit.
(just trying to understand why people accept this sort of things)
A few dollars? Qualcomm skins you for all you are worth. Yeah, the actual chip is few bucks more, but the support framework for that chip is mega $$$. Want to debug the modem? Looks like you need Qualcomm's proprietary debug tool QXDM! That'll be $25K per year per seat. Oh and if you want their support (so you aren't flailing around with their gigabytes of generated logs) be prepared for another $200k annual support subscription per team. Want a certain document so you can figure it out yourself? $$$.
And Amortised over 200M annual iPhone unit shipment? That would be less than a dollar per unit. Not to mention it is highly unlikely Apple paid anywhere close to those prices.
They already are.
In a few years it could be so that all the tier 1 smartphone vendors have their in-house cellular modem.
This could go either way.
Apple is clearly doing this because they want to give Qualcomm the finger. But if they really want to do that then they do sell parts to any other OEM.
Most of the devices these radios go in don't actually compete with Apple products. The largest volume is in low end phones and things with radios that aren't even phones, like base stations and smart meters. Apple could sell the chips for commodity prices and make a bit of profit for itself while still undercutting Qualcomm and making them hurt bad in the volume segment of the market where Apple doesn't otherwise compete but where Qualcomm makes a lot of its money.
Never gonna happen. You can't just sell the chips, you also need to provide a TON of support to your customers and integrators and in the semiconductor business that's way too much of a hassle for Apple to be worth it. They have much bigger fish to fry.
They could always set up a joint venture, Apple brings the IP. The partner does the day to day stuff. It doesn't make a lot of sense to be sitting on top of IP and R&D that could be amortised over a much larger number of units.
A better alternative would be for another interested buyer to appear at the negotiating table, presumably that would require the price to somehow magically come down.
Edit: @DannyBee above has already helpfully commented that the FTC has previously required that the buyer continues to sell to / support customers for some time period following the purchase.
oh wait, Unisoc is the company Intel shared 5G modem secrets with https://www.scmp.com/tech/science-research/article/2187895/i... ...
For example, when Google bought ITA, ITA was required to continue licensing the software on "commercially reasonable terms" to other people.
See https://www.wired.com/2011/04/google-ita/ for an example.
Now, whether this will happen in today's FTC/DOJ, no idea.
But that is one traditional path here.
I don't think it makes a ton of sense for Apple to resell their A-series CPUs, but 4G modems is a little different, they're more generic. If they manage to make good modems why wouldn't they sell them to others? The people buying iPhones won't switch to an Android device, just because it's the same modem.
Cheapo android handset makers wouldn't be able to afford the resulting silicon - it'll be too expensive due to the large area. It'll also likely diverge from the way everyone else builds modems - no more AT commands!
Does it matter?
1. Intel aren't selling their modem to anyone else anyway.
2. MediaTek Still supplies Discrete Modem.
3. Apple, Huawei, Samsung are already 50%+ of the market.
With Xiaomi, BBK ( Vivo OnePlus Oppo ) going to have their own / shared Modem solution in a few years time. Which combined to ~20% market. There isn't that much of a market left for players other than Qualcomm and Mediatek.
Having worked in the semiconductor business in Germany and having friends who worked at Infineon there, the cause would be the corporate culture that rewards incompetent management riding the gravy train(old boys club) instead of engineering effort and playing the politics game is the only way to move up, even though lots of engineers there are very talented people.
This, coupled with Intel's own innovation culture that fails at anything that doesn't involve milking the X86 resulted in a dumpster fire.
Under Apple, these same engineers could probably ship something competitive if Apple plays their cards right.
The only real product success they had was getting Apple for 4G and we can quite clearly see that as more of a strategic move by Apple against Qualcomm. Over that period there were numerous issues about Intel chips not being as high performance or low power as Qualcomm - which we'd hardly find surprising.
So there's that element to it, but the second element is that Intel has a fantastic reputation for destroying the businesses they acquire. Essentially what happens is that once they acquire a business they do a number of things:
1. They take a long time to perform these acquisitions. The timeline from first hints of acquisition to close can be years. So the engineering organisation of the company being acquired starts to hide problems because they fear it will endanger the acquisition. So you have a steady build up of issues that will overflow on day 1 after the deal closes.
2. They massively invest. This means massively increasing the cost structure of the acquired company, they do this whilst setting much higher targets to justify the investment. But there's two problems: The new employees take a long time to bring up to speed, and because Intel is constantly re-prioritizing you have existing engineers in Intel who are trying to move across into any role available. Suddenly you have a team of engineers in Folsom who basically have no work to do and so they're dumped into the new growth area (because as we all know, engineers are fungible commodities). The acquired company needs to figure how the hell these engineers are going to contribute.
3. They massively increase expectations. That investment has to pay off, so they set way higher new goals - and not "In 5 years time you need X revenue" more "This year you need 30% revenue increase". This immediately puts the new business in panic mode - EOLing products and doing sales tricks to invent revenue to hit the target. Year 2, all the sales guys know they pumped year 1's numbers to hit their targets so the good sales guys jump ship -either into different parts of Intel or entirely out of the company.
4. They find SYNERGY. What that means is every other branch of Intel will turn up and start either insisting you use their technology (guess what: You're using the Intel Fab now despite the fact we can't deliver on 10nm). Because Intel is so much larger than the companies they acquire your little business group suddenly has thousands of people coming to you saying "How about you work on this" or "Our client needs this let's bundle these products". That creates massive attrition on your core business.
5. They scale up: Intel is such a big company they literally can't chase small revenue - it would eat them up in COGS to sell $1m at a time. So very quickly the acquired business starts to lose its small customers that make up the revenue that made the business attractive in the first place.
So in the end: You've alienated all your customers, you've thrown your engineering organisation into dis-array, you've set ridiculous targets, and you're now owned by a company that's perfectly willing 5-10 years down the road to pull the plug on the entire sector you're working in. Hey presto: They 10 year cycle from Acquisition to Spin-off. Say hello to the boys at McAfee!
Miniaturized, high frequency, low-power, high bandwidth, radio modems to be exact - supporting multiple complex protocols. In real-time. Meaning it is all done in hardware, although firmware does some management stuff. It's about as hard as silicon engineering gets.
( Disclaimer: I used to work there, could give more details, but NDA )
then they can‘t say anything because of nda. or the gsm standard manual costs hundreds of dollars.
my tin foil hat is glowing, i‘m telling you. we already know that gsm encryption is a joke. i don‘t want to imagine what‘s going on inside all those closed-source baseband firmwares. it creeps me out.
Then, the protocol stacks on top of that are enormous and complex. The software is very large.
Broadcom also tried and failed because they underestimated the task, IMO.
Those who can/could make it happen are those who are willing to invest massively over many years and, ideally who have a sure customer. E.g. Huawei who is willing to take the long view and who ships hundreds of millions of phones.
What I mean is that even today, if you buy a 4G enabled phone not powered by Qualcomm, your battery will drain in a few hours and you'll be left with a dead brick for the rest of the day.
Source: I spent years building 3G and 4G PHY chips at various QC competitors that have all since folded up or have been bought and merged into other teams.
I had an iPhone 7 with an intel modem (AT&T iPhone) for 3 years. The battery did not die in 4 hours.
How Qualcomm shook down the cell phone industry for almost 20 years - We did a deep-dive into the 233-page ruling declaring Qualcomm a monopolist.
https://arstechnica.com/tech-policy/2019/05/how-qualcomm-sho...
[1] https://www.forbes.com/sites/patrickmoorhead/2019/01/16/if-t...
Small innovators are often simply too worried to enter some markets due to this. Because they don't have the arsenal of big competitors to fend off patent threats.
Next thing they can imagine they are being ripped off by some competitor, because they don't like the color of some device or what not. So why should anyone trust them not to do abuse the patent system, just because they can.
I.e. I see any such abusive company arming themselves with even more patents like a very negative development.
Nice strategy, but its somewhat unethical.
Now, the second bakery is hanging on by a thread because you aren’t buying his bad bread. He decides to get out of the bakery business so he can use the money to invest in his roofing business instead. You see an opportunity to make even better bread than the best bakery, so you agree to buy the second bakery.
Nothing unethical at all there. That’s exactly how free markets are supposed to work. The key point is that nobody forced Intel to make bad modems and nobody should be obligated to pay Qualcomm’s high prices. It isn’t Apple’s fault that Intel modems weren’t that good. It isn’t Apple’s fault they want to build something better than other market participants are currently providing.
That arrangement may work totally for Qualcomm and somewhat for Apple, but it’d be devastating for Intel.
Apple really wanted Intel to provide their chips, to the point of shipping a phone with dual Intel-Qualcomm modems, with the Qualcomm one throttled because Intel couldn't match its speed. Intel just wasn't able to make their modem business work, after years of work and at least four (!) acquisitions of modem makers.
Apple had no choice but to go back to Qualcomm if it wanted to sell phones.
https://semiaccurate.com/2019/04/18/why-did-intel-kill-of-th...
https://arstechnica.com/tech-policy/2019/05/how-qualcomm-sho...
We’re at least a few years away from that possibility, especially given the poor state of the Intel modem technology, but if Apple can pull this off they’ll have yet another technological exclusive differentiating feature. This time, one truly central to the platform technology.
At this point, nuking Qualcomm's profitability seems like the only reasonable thing left to try.
For one thing, Qualcomm isn't going to be ditching the modem business; they just aren't allowed to be predatory monopolists on it anymore.
For another, because Qualcomm isn't allowed to use the anticompetitive tactics they've used in the past, it will now be possible for someone else to break into that market. It'll take a lot of time, money, and effort, to be sure, but if someone else can get modems working even in the same quality ballpark as Qualcomm's, they'll have a guaranteed revenue stream from people who would be overjoyed to stick it to Qualcomm.
And, of course, at this point, there's no guarantee that Apple will be making modems for anyone but themselves.
Of course Apple isn’t going to make modems for anyone but themselves.
I don't think this would be any different if Apple one ever seizes the advantage. Ultimately, no one really gets these speeds anyway due to the data carriers.