Apple needs chips that will connect the iPhone to the new, fifth-generation wireless networks being introduced now or risk falling behind its rivals. The company had bet on Intel Corp., but recently decided its would-be 5G supplier wasn’t up to the task.
Intel, which dominates the market in personal computer chips, has struggled for decades in mobile. The company pledged that its 5G part was coming in phones next year. But within hours of Apple’s deal with Qualcomm, and with it the loss of its prime mobile customer, Intel announced it would end its effort to produce a 5G modem for smartphones.
Apple already faces falling iPhone sales and a saturated global smartphone market. The company in January reported that holiday revenue declined year-over-year for the first time since the iPhone was introduced in 2007. As it pushes more services tied to its smartphone, Apple can’t afford to lose potential customers because its technology wasn’t up to speed.
Apple and Qualcomm’s agreement is a six-year pact, according to the joint statement from the companies. Gene Munster, a longtime Apple analyst and now co-founder of Loup Ventures, believes Qualcomm won the showdown, but it may be a short-term victory. Munster said the chipmaker may lose Apple as a customer in three years because the Cupertino, California-based company will be able to manufacture its own modems by then.
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