In our last post we examined the potential for there being no 5G iPhone until 2021. Here, we want to dig into why that may happen and what options Apple may have to address the problem.
The big problem facing Apple is it does not have a 5G modem or baseband. This is the key chip that connects phones to the wireless networks. In the current versions of the iPhone, Apple relies 100% on modems from Intel. However, as was clear from MWC and ample other press coverage, Intel does not have a 5G modem. And it sounds like there modem will not be “available until 2020”.
It is not entirely clear what the date means. If the chip is sampling in January next year, that will leave (just) enough time to design it into the 2020 iPhone. Unfortunately, Intel does not have a good track record on this. They had nothing in their MWC booth to even hint at having a 5G modem ready. So there is a serious possibility that it will not be ready until later in 2020. This would put serious stress on Apple’s design cadence around a September iPhone release.
If Apple wants a 5G iPhone next year, this leaves them few options, and none are good.
Their first option is to essentially hope Intel gets the product done on time. But this is a major risk that could leave the company with nothing to launch next year, 5G or otherwise. Apple is likely doing a lot of work to get Intel’s modem in shape in time, but at some point soon they will have to make a hard choice about seeking an alternative.
Mediatek of Taiwan makes modems and once expressed a great deal of interest of winning Apple as a customer. Mediatek even has a 5G modem, which should be available later this year. There are a few problems with this. First, Mediatek’s has not historically targeted all the features in their modems to make them suitable for many operators’ networks (especially highly-picky US operators). They have the capability to do this, but it’s just not where there market is. As a result, Apple has been reluctant to take them on as a vendor. Second, Mediatek may not want the headache of dealing with Apple. It would require a massive investment, and Mediatek has been spending a lot of resources in recent years to diversify away from mobile. Add to that the fact that Apple is not an easy customer to have, to put it diplomatically. Either way, this does not look likely.
Other companies, notably Samsung and Huawei, have 5G modems, but it is highly unlikely that Apple would enter a business deal for a key component with their two largest competitors. So let’s rule that out too.
That leaves Qualcomm. That company is the leader in modems and has a great modem ready to go with another coming very soon. Of course, Apple and Qualcomm are suing each in a global scorched Earth legal war. Qualcomm has long held that these kinds of lawsuits happen and then everyone settles and gets back to business on some new terms. This is what happened when they got sued by Ericsson, and by Nokia, and a host of others going back decades. For a period after their last lawsuit, Nokia was a major Qualcomm customer before that company exited the handset business.
This suit with Apple feels different. Apple’s campaign appears to be, if anything, widening in scope, they are not acting like a company that someday wants to settle into a cozy relationship with Qualcomm. There is a lot of bad blood on both sides now.
There are some timing considerations that further muddy the picture. Qualcomm is being sued by the US Fair Trade Commission, and any outcome there will have an impact on their other disputes with Apple. There is also a central suit between the two scheduled to start in April. It is unlikely that the companies can or will settle prior to the FTC outcome. On the other hand, these kinds of suits typically settle before a trial, often right before. No one wants to roll the dice on a jury. Maybe Apple does, maybe not.
If the two companies do settle, this would open the door for Qualcomm to supply a 5G modem. If we assume an 11th-hour, courthouse-steps settlement, that leaves 17 months before the 2020 iPhone. For companies of their size and ability to execute on core products, that is plenty of time. However, if they do go trial, then the clock keeps ticking. The point of no return is probably a year ahead of the launch, so October of this year. In theory, they could get a phone design done in less time, but the end of 2019 is effectively the latest time in which that is still viable.
Another option for Apple is to build their own modem. We have written about this recently, as there are pretty clear signs now that Apple is going down this path. All our checks and public data indicate that Apple is still in fairly early stages of its design. For their modem to be ready in time for a 2020 iPhone, they would have to be much further along than it currently seems they are. This is most likely a 2021 target. Recall that building a 5G modem also requires backward compatibility to all the other G’s (2G, 3G, 4G). That is a lot of work to accomplish, and it is the type of work that does not scale quickly. Consider that Apple seems to have plans to hire 1,000 engineers in San Diego, a nexus of modem talent. We believe their target is 500 hires this year and 500 next. That size team can build a modem, but hiring it will take some time.
One possible way for Apple to accelerate this is to license much of the modem from Intel. They could use Intel IP blocks for the other G’s and just focus on 5G. That may accelerate things, but comes at the cost of having to integrate, test and verify the whole system. Again, it is possible that they could accomplish this in time for a 2020 phone, but it would be challenging.
Also, we should not necessarily assume that Apple can build its own modem. These things are hard to build. All the other companies have thousands of people working on their modems. Apple has great engineers, but historically they have struggled with networking products like this. For years, they tried to build their Bluetooth/Wi-Fi modules, but today they still rely on outside suppliers for this. And cellular modems are orders of magnitude more complicated. We assume that Apple will eventually get it right, but it may take longer than they expect.
There is a final option available to Apple – resort to their distortion field. Apple has a lock on its users’ imaginations in many ways. They could add some features to the phone and just slap a “5G” label on it. This will surely wrankle a lot of people (not least the telcos), but since 5G itself is something of a marketing gimmick at this point, it may just be enough to hold Apple over until they get the real deal.
Netting this all out we see three ways for Apple to have a 5G iPhone next year:
- Some combination of Intel and their own internal design. This would be a massive and risky engineering feat, but they might be able to pull it off.
- Settle with Qualcomm. Again, theoretically possible, but increasingly unlikely given the state of their legal disputes. And at best, this would be holding pattern for a year or two until Apple gets its own modem working, which likely decreases the time pressure Qualcomm wants Apple to feel.
- Market their way out of the problem.
At some point, Apple will need a 5G iPhone. Its lack this year will be noticeable, its lack in September 2020 will be glaring, and by 2021 would be a problem. If we had to guess, Apple is going to bite the bullet and hold out until their own modem is ready. To some degree they may be able to paper over the problem for a few years, but a lot will depend on their ability to get the chip done.