Companies mentioned: Intel INTC 0.00 , Apple AAPL 0.00 , Infineon, Fibocom, Mediatek
The history of wireless cellular modems for Intel has been a little mixed compared to its compute divisions. The company has had cellular modems for:
3G, known as Intel SoFIA,
4G, which had big wins in various Apple devices, and
5G, which was (mostly) sold.
For the 5G modems, Intel sold its ‘Intel Communications and Devices Group’ (CDG) business to Apple in a $1 billion deal back in 2019. CDG was derived from Intel’s purchase of Wireless Solutions from Infineon in early 2011 for $1.4 billion. The 2019 deal with Apple meant that Apple obtained most of Intel’s 5G modem IP, related product teams, equipment, and property leases. Apple has been working with the IP gained in that deal to develop its own 5G modem – which has not yet hit the market. The deal only covered smartphone modems – Intel retained critical IP and the option to build modems for PCs, embedded markets, autonomous driving, infrastructure, and other verticals.
Since the deal, Intel has been working on two fronts – maintaining its 4G modem business, alongside its supplier Fibocom Wireless, and as of 2021 Intel has been working with MediaTek to bring 5G to PCs. This means leveraging the modems MediaTek and Fibocom have developed, along with driver stacks from Intel, and also leveraging Intel’s multi-year relationships with PC OEMs, OSVs, and wireless carriers.
From Intel Computex 2021
However, we have since learned that Intel is now set to exit all of its Client and Commercial WWAN / Cellular Modem business for PCs.
For those following Intel of late, this might not be a shock. As part of Intel’s growth strategy in manufacturing, and the recent macroeconomic climate, Intel has been looking to exit certain businesses which have not been overly beneficial to the balance sheet. The WWAN business is one of those. However it should be pointed out that this does not affect other parts of Intel’s connectivity strategy, including Wi-Fi, Bluetooth, Ethernet, Thunderbolt, or network+edge businesses
In discussions with Intel, they made clear that the reason behind it was simply one of return on investment – since the sale of CDG to Apple, Intel has not seen the return on investment needed to justify ongoing expenditure. According to our sources, Intel believes the total addressable market (the financial size of the ‘modem-enabled PC’ market overall) hasn’t grown in ten years – but perhaps more importantly whenever Intel has had sustained revenue, that revenue has had negative margin associated with it.
For the business that Intel does have, two aspects will happen.
For the 5G business with MediaTek, Intel will undertake a technology transfer to Fibocom and MediaTek, and is in the process of enabling driver code, licensing agreements, and as much as they can to maintain the customer experience. Intel will keep a small team onboard to assist MediaTek, who intend to remain in the business. The technology transfer is expected to be completed sometime in May, and by July, Intel is expected to have left the 5G market altogether. The technology transfer to Fibocom and Mediatek isn’t expected to be financial to Intel, either positive or negative.
Intel’s OEM partners leveraging 5G solutions will be able to continue to work with MediaTek in order to supply updates and upgrades to current product roadmaps.
For the 4G business, Intel will start the process for end-of-life of their 4G modem portfolio. As mentioned before, Fibocom is the main partner here, and the last shipments to Fibocom are expected to occur in late 2025, depending on orders.
No new research or technology will be done in this market.
Simply put, this is Intel doing additional cost cutting to a business that was costing some money and not really making any money. For the profit and loss sheet, this will all fall under Intel’s Client Computing Group (CCG), however the costs to the business unit were around tens of millions per year, so we’re not expecting to see a significant change on next financial statement. From the Wireless Solutions Group at Intel, this WWAN division was around 20% of the personnel, including both product marketing and engineering.
In my coverage of Intel’s last financial statements, I highlighted several divisions that could be cut in order for the company to save money, especially after the exit from the Optane memory business, and the cancellation of Intel’s optical switch networking business. I’ll be honest, I didn’t have the cellular modem business on that list, namely because it is so small. However there could be a half-dozen of Intel’s other smaller businesses that follow the same route – businesses that cost Intel tens of millions a year, they have a small market share, it’s a mature market, and the market is not growing. It’s the sort of market that incumbents or market leaders do very well in.
We reached out to Intel and to MediaTek to get respective statements on the change.
“As we continue to prioritize investments in our IDM 2.0 strategy, we have made the difficult decision to exit our WWAN client business for both LTE and 5G. We are working with our partners and customers to facilitate a seamless transition to support their ongoing business and ensure our customers continue to have solutions for the connected PC segment. Moving forward, we remain committed to working to enable the industry to deliver great solutions to market and make sure those solutions work great on Intel-based platforms.”
Eric McLaughlin, VP, GM Wireless Solutions, Intel
“MediaTek has a strong history of delivering global wireless solutions, and continues to make investments in its wireless modem portfolio beyond the smartphone into PCs and other devices. We will continue to work with Intel on the wireless modem technology transfer to support our existing customer base and future partners.”
Statement provided by MediaTek
Personally, I feel this is step in the right direction for Intel. There will, of course, be some discussion about the previous messaging used by Intel or used by its competitors when it comes to ‘how cellular wireless should be executed’, however that’s not Intel’s focus. Right now for Intel it’s more important to align the overall business. Intel’s CEO Pat Gelsinger has spoken about realigning the company - to strip back on the parts that aren’t making money, and focus on improving the margin and volume of capital intensive parts and their competitiveness.