Intel’s Mobile Problem

Apple’s partnership with Intel to develop a 5G iPhone was not going well, and the writing has been on the wall for some time. It didn’t surprise anyone when Apple had to eat humble pie and settle its patent disputes with Qualcomm. (Daring Fireball has a good analysis of the situation.) This has been a costly blunder — for Apple, at least. Qualcomm is expecting a $2-a-share boost in its earnings as a result of the settlement.

While a lot of digital ink has been spilled on Apple’s retreat, somewhat lost in the shuffle is Intel’s failing grade when it comes to cashing in on mobile opportunities. Soon after the arrangement with Apple fell apart, Intel announced that it was exiting the 5G mobile modem business. This move was undoubtedly related to losing their only customer of consequence. To be sure, the Cupertino Counts can be demanding customers. But without Apple’s orders, Intel can’t pay for the ever-increasing costs of a cutting-edge chip fabrication plant.

Honestly, Apple should have known better than to bet on Intel for this project. This is a company that has had more fits-and-starts in the world of mobile than Microsoft. It had low power processors for mobile handhelds, but couldn’t make a go of it. Back in the day, when Nokia was a big name, they partnered with Intel on an operating system called MeeGo. It might as well have been called NoGo. Nokia also got rid of their in-house modem business and expected Intel to deliver a 4G modem. Oops. It wasn’t long before Nokia was unable to play in the lucrative American market, where carriers like Verizon were leading the LTE revolution.

Years later, Intel is just one more example of a company unable to confront the difficulties of change. It has allowed ARM to run away with the mobile billions. It has been unable to keep up with Qualcomm. And most importantly, it is still relying on personal computers and data centers to keep the home fires burning. It is not a matter of if but when others, such as Qualcomm and AMD, will catch up with them in the data center business — especially as we start to see a new kind of stratification emerge in the cloud.

Let this be a lesson for Apple and others: if you are in a trillion-dollar race to stay on top of the smartphone and hardware business, focus on being vertically integrated. Apple has typically done such a good job of obsessing over these details. Why risk it all on a known slacker like Intel? Before Apple embarks on another fool’s errand, I hope they read this old post of mine. In fact, they should go ahead and bookmark it.

This first appeared on my April 21, 2019, weekly newsletter. If you like to get this delivered to your inbox, just sign-up here, and I will take care of the rest.

Photo by Magnus Engø on Unsplash

A letter from Om

Sign up & get it delivered to your inbox