Intel drops out of 5G market

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The iPhone used to rely entirely on Qualcomm's chips, but from 2016 Apple started using rival Intel's modem chips in some models.

Qualcomm's share price surged 23.2 per cent, its biggest gain in more than 19 years, while Apple's stock ended its day flat.

Intel Corp, which had been Apple's sole iPhone chip supplier for the past year amid intensifying conflict with Qualcomm, said hours after the settlement was announced that it would exit the modem chip business. With iPhone X, both Intel and Qualcomm were the suppliers. This was discovered when Apple and Qualcomm released a joint press release detailing their agreements to drop litigations, just as Qualcomms head lawyer finished delivering opening remarks.

Because Qualcomm is already shipping 5G chips while Intel was still developing them, the deal helps Apple in its battle with Samsung Electronics Co Ltd and other manufacturers whose phones already work on the faster networks. Going forward, Intel could perhaps see strength in other portions of the 5G market - though that will come after it completes "an assessment of the opportunities for 4G and 5G modems in PCs, internet of things devices and other data-centric devices". As a result, the face of the cellular modem market is changing in an instant, as Apple's shift in allegiances will have repercussions throughout the industry.

Apple had argued that Qualcomm's royalty demands meant it was effectively insisting on payment for innovations by Apple - such as touch ID or Apple Pay - that Qualcomm "had nothing to do with".

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Apple had claimed that Qualcomm had abused its patent-driven dominance to charge excessive royalties.

As part of the settlement, Apple will now pay Qualcomm an undisclosed amount related to royalties the chipmaker accused Apple of purposefully withholding as part of the dispute during a new, six-year global patent licensing agreement that may in the future be extended another two years. This has been capped at $400 by Qualcomm, but still represents a much higher value than the $20 cost of a Snapdragon modem chip.

Apple and Qualcomm have reached a six-year license agreement starting from 1st April 2019 and effective at least until April 2025. Seems nothing odd with this, but Apple is now embroiled in a massive legal battle with Qualcomm, while Samsung is remaining the closest rival of it.

Based on the decision in the FTC suit, Apple was assumed to have the edge in its case.

Apple has been shifting and trying to open up new businesses: its push into content, for example, and one reason for that is that iPhone have been dropping hard.