What does this week's Apple-Qualcomm-Intel dance mean for the future of 5G?

The market for critical components of next-generation smartphones is changing rapidly at the dawn of 5G.

At its center is Qualcomm, the manufacturer of silicon chips whose miniature modems can place the "phone" in the iPhone. According to analysts, two key developments this week should make Qualcomm the only major US supplier of 5G wireless chips. This is a major shift in the balance of industry forces, the effects of which will last for years.

Qualcomm and Apple announced Tuesday that they had agreed to bury a longstanding legal dispute and that the iPhone maker would become Qualcomm's customer over the next few years.

The agreement could mean that Apple's future mobile devices will use Qualcomm's chips to connect to high-tech 5G networks, which promise ultra-fast download speeds and access to new technologies, applications and services.

A few hours after the announcement of this deal, Qualcomm's main rival, Intel, announced that it was completely abandoning the 5G chip market to focus on other aspects of 5G technology. It was expected that Intel would provide Apple with 5G chips for its iPhone 2020. This essentially left the 5G chip market – which is expected to reach $ 20 billion globally by 2025 – at Qualcomm and Canada. a handful of other producers.

"In the United States, towards 5G, it's the world of Qualcomm and everyone is just paying rent," said Dan Ives, industry analyst at Wedbush Securities. "Qualcomm's competitive position is significantly strengthened now."

Qualcomm's main competitors are now Chinese Huawei and South Korean Samsung. But these companies are producing chips primarily for their own ranges of branded smartphones, rather than selling them to phone makers like Apple.

[How China’s Huawei took the lead over U.S. companies in 5G technology]

Qualcomm is also competing in the chip market with Taiwan-based MediaTek, said Roger Entner, industry analyst at Recon Analytics. But MediaTek, he says, is usually found in low-end devices, not in high-end phones like the iPhone.

"If you want to make a really cheap phone, you use MediaTek chipsets," said Entner. "They are not as good as Qualcomm."

This leaves Apple in a difficult position. Between its contract with Qualcomm and the release of Intel 5G chips, Apple is now indebted to a single provider of 5G modems.

Qualcomm and Apple declined to comment.

Apple has used Qualcomm exclusively in the past, but has shown disgust for this type of arrangement. Last year, Apple sought an advantage over Qualcomm by hiring Intel to provide about half of its iPhone 4G chips.

By spying on companies, Apple hoped to reduce costs. But with Intel out of the market, Apple can no longer rely on this dynamic. Likewise, no other phone maker that has to buy its 5G chips on the open market.

For years, Intel has struggled to create wireless chips as powerful as Qualcomm, according to analysts. In terms of key metrics such as battery life and mobile data speeds, Qualcomm chips simply worked better.

"Generation after generation, Qualcomm has demonstrated its ability to develop products faster than its competitors," said Walt Piecyk, industry analyst at BTIG. He added: "Qualcomm has demonstrated over the last 20 years its ability to manufacture better products than not only its competitors, but also the attempts made by companies to build [chips] internally."

Intel has acknowledged its disadvantage in 5G chips in its announcement on Tuesday.

"It has become clear that there is no clear path to profitability and positive returns," said General Manager Bob Swan in a statement.

Some have speculated that Apple, like Samsung and Huawei, may be looking to design its own chips in the future, either to gain independence from Qualcomm or to compete head-to-head. head with wireless chips. Several Apple job offers have suggested that the company is exploring this strategy. But analysts said it could take years of investment and hard work to develop what one could buy from other vendors in an instant.

[Apple and Qualcomm have settled their epic lawsuit over chip patents]

Chinese technology giant Huawei said this week that it was open to selling its wireless chips to Apple. But a number of analysts have rejected the offer, calling it a "drag", saying the US government's current concerns about Huawei's product security – as well as Apple's respectful privacy marketing – would make it difficult or even impossible, the acceptance of Apple's general manager, Tim Cook.

"Due to the political environment, Huawei would have a hard time finding its way into Apple's phones, especially given Tim Cook's emphasis on privacy," said Mr. Piecyk.

For the US phone manufacturers, few major suppliers remain in the 5G chip market. And they can not afford to wait for another developer to come, especially when federal officials and mobile operators are calling for the rapid adoption of 5G as a national imperative.

"By the end of 2020 in the United States, we will have 5G networks at the national level in the [airwave] "If you do not have a good 5G phone [to sell], You have problems."