Thoughts on the Apple/Qualcomm settlement

I wrote on the substance of the Apple/Qualcomm agreement already, so this is just a selection of thoughts/reactions to the surprise settlement of the Apple/Qualcomm litigation.

Intel leaves the modem business

Apple’s announcement that it reached a deal with Qualcomm was surprising enough, but this was soon followed by news that Intel is shuttering its own 5G chip development. I have no inside track on the order of events, but it seems possible Intel decided to quit the business first, forcing Apple into the corner – or that development of alternative modems proved to be too challenging. The truth will come out eventually.

Apple and Qualcomm had their say

What’s interesting about the peace deal – reportedly in the works for “weeks” – is that both Apple and Qualcomm must have been aware the negotiation was taking place. In ordinary circumstances you’d imagine both parties would have stayed legal action while talks continued.

They did not.

Instead, both parties made their opening arguments before settlement was reached.

That’s interesting because this means their positions are now part of the public record. It seems possible this may prove important in the future.

iPhone 5G a go-go

Apple’s determination of a deal with Qualcomm means it will be able to introduce a 5G iPhone, though not until 2020.

While we can expect the usual “Apple is late to market” story lines to percolate, the truth is that once it does launch that device, we should see 5G networks and services proliferate as Apple’s active user base drives the change.

The next 12 to 24 months of the 5G industry will almost certainly be all about network roll-out and services development. Apple won’t be missing much.

Strategic importance

5G “Mobile Broadband” is expected to drive new products and services.

There are many reasons for this, but Apple’s decision to reach a deal with Qualcomm suggests that the company may have a few reasons more: Apple’s AR glasses in conjunction with Apple Arcade and TV+, Apple’s development of an Apple Car, and next-generation mapping and location-based services (and the need to support all these with a mobile network infrastructure capable of underpinning such service provision) all feed directly into a 5G narrative.

Marklar or Marzipan?

Apple’s chip development teams have built some of the world’s most powerful mobile chips. The evidence suggests those teams have been working to develop 5G solutions (though not necessarily chips). The move to adopt Qualcomm’s shows the challenge of doing so.

It’s important to remember why Apple began developing its own processors in the first place: The need to rely on third parties for its processors has arguable been a big problem for the company since forever – recall how it was hindered by its reliance on chips from IBM/Motorola for a decade before it switched to Intel, for example.

This is one reason why it creates its own mobile processors.

Intel’s seeming inability to deliver salvation from Qualcomm’s business practices will force Apple to consider developing more of its own processors in future.

This is an argument that rather reinforces expectation of Apple chips inside future Macs. Will Project Marzipan turn out to be more of a Project Marklar?

Market dominance

Qualcomm has won a big victory here. Not only will it see billions in incoming payments from Apple and Apple’s suppliers, but it has also knocked one of its competitors out of the business.

The company has also recently benefitted from the effective neutralization of another of its foes, Huawei, with telecom firms in developed economies now declaring it to be some form of threat. That leaves MediaTek and old Apple rival, Samsung.

However, with Qualcomm playing nice with up-and-coming Chinese brands Xiaomi and Asus, Samsung seems likely to become Qualcomm’s next primary competitor in the space. Given the importance of mobile to that company’s bottom line, it will need to react.

The big question here may emerge as a matter of market dominance.

Qualcomm must now anticipate intensified regulatory oversight as it becomes the de facto dominant provider of 5G connectivity, given that 5G is expected to become instrumental all across the mobile ecosystem.

I can’t help but think that Qualcomm is now in position to define the future of the mobile industry through its control of the 5G modem tech used inside most devices.

That kind of market power usually attracts regulation. 

Six years is a long time in tech

The market itself is going to need to nurture a strong competitor to Qualcomm.

With that in mind the six-year duration of the détente deal between Apple and the firm may come to mean something over time.

Apple is not going to want to remain in thrall to one single modem supplier forever, and while it seems pretty clear that replacing Qualcomm’s 5G tech without impinging on its patents is already highly complex, that close unity between proprietary technology and a global networking standard is unlikely to remain unchallenged. At what point should such technologies be made available on a “FRAND” basis?

Qualcomm has other challengers who may be prepared to take up that argument.

Depending on market evolution, they may need to do so.

5G is here

Watch 5G become a reality starting next year. There’s little reason to be a first adopter (at present). Let the market coalesce a little before dropping dollars on tech that may or may not be useful to you. Second- and third-generation 5G hardware and services will likely be more power efficient and reliable.

Bandwidth is a global challenge

The subtext to the whole matter is how important Apple sees 5G technology to the mobile future. If 4G unleashed a seismic quake in digital transformation, 5G seems set to drive a second tidal wave of change.

Next-gen tech from Industry 4.0 to Agriculture 3.0, wearable computing to contextually-sensitive voice-first computing interfaces, to smart cars and connected health services will all rely on 5G.

No one wants their remote surgeon to make an incorrect incision because of a temporary loss of mobile bandwidth, after all. No one will want to experience a 20-vehicle pile-up because vehicle-to-vehicle collision protection systems temporarily went offline.

Bandwidth matters.

And it’s going to matter more.

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