Intel's exit from the 5G phone space places an even bigger bet on the IoT (QCOM AAPL INTC)

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Intel's exit from the 5G phone space places an even bigger bet on the IoT (QCOM, AAPL, INTC)

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Semiconductor giant Intel announced that it will exit the 5G smartphone modem business to focus on its other lines of business, including the IoT as well as PCs, data center hardware, and networking infrastructure.

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This shift comes on the heels of Apple and Qualcomm agreeing to end all litigation between themselves. The two companies also set a licensing agreement that will see Qualcomm supply chipsets, including modems, for iPhones and other Apple products.

Here's what it means: Intel had been working with Apple to supply the latter with modems for its upcoming smartphones, including potentially the first generation of 5G iPhones. But now Intel won't be entering the space at all, which has fueled speculation that the settlement between Apple and Qualcomm was made with the knowledge of (and in direct response to) Intel's decision.

Intel hasn't provided much in the way of details or reasoning as to why it's exiting the mobile 5G modem market, but its past smartphone efforts as well as other mobile chipset offerings for devices such as tablets and mini-PCs were plagued by poor performance and, fatally, subpar battery life.

The company hasn't been able to extend its dominance from the PC space into mobile, and while 5G could have offered it an opportunity to move into that sector, Intel is now going to devote its efforts elsewhere instead.

The bigger picture: In minimizing its smartphone presence, Intel will be placing an even bigger bet on building revenue from the IoT, as well as from data centers and memory production, which could propel it into more of a leadership role in the IoT marketplace.

The company has taken a number of steps to expand its IoT solutions — it worked with JD.com to develop a retail technology lab, for instance — and has been building the revenue base of its IoT unit fairly steadily in recent years, barring the most recent quarter when a business unit it sold off reduced inbound revenue slightly.

Troublingly, though, Intel's IoT-adjacent revenue — from services that it supplies to support hardware deployments — has been trending downward for the past two reported quarters since it finalized the aforementioned sale. This had been a steadily growing segment for the company in recent years, but its revenues for these adjacent services have been roughly halved, falling to 2014 levels.

Continuing to develop combined hardware-software solutions for IoT customers, especially those that are able to employ AI tools and take advantage of 5G networks, could help Intel to build on and maintain revenue even without moving into the 5G smartphone modem market.

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See Also:

• Apple's new long-term India strategy is a bid to win local consumers
• Apple's blockbuster legal settlement paves the way for a 5G iPhone
• Intel dropped a bombshell and said it's giving up on the 5G smartphone business: 'There is no clear path to profitability and positive returns'

SEE ALSO: 5G AND THE IoT: How the next generation of wireless technology will transform the IoT

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April 18, 2019 at 09:09AM