In a recent internal meeting, Apple's SVP of hardware technologies Johny Srouji told employees that the company has "kicked off the development of our first internal cellular modem which will enable another key strategic transition." That's according to a report from Bloomberg that suggests Apple has started building its own 5G modems to replace those it currently uses from Qualcomm.
I think you could argue that the modem is the most important component inside an iPhone. Without it, no matter how nice the form factor or how powerful the processor, it's basically just an iPod touch. The modem is the piece that allows it to connect to cellular networks, a fairly important quality for a mobile phone.
The move doesn't necessarily mean Apple plans to kick Qualcomm, its current supplier of modems for the iPhone 12, to the curb entirely just yet. It's actually more complicated than that.
Qualcomm is the dominant manufacturer of modems, and even moreso, the technology that makes them work. The company owns some 140,000 patents related to 5G technology, meaning that almost every company that makes cellular modems is paying a licensing fee to Qualcomm.
But Qualcomm builds modems and mobile processors for a range of manufacturers, meaning it has to accommodate a diverse set of needs and design. The iPhone may be one of the most popular smartphones sold, but Apple is still just one of many companies that Qualcomm sells to.
That means that one of the most important components in the iPhone is one of the few that aren't highly specialized for exactly that device.
Apple and Qualcomm entered into a settlement in 2019 that resolved a years-long battle over licensing fees and gives Apple access to modems through 2025, with an option to extend for two more years. Apple had used Intel's modems in the iPhone 11 as part of its response to the battle.
Shortly after the Qualcomm settlement, Apple bought Intel's entire modem business for a bargain at $1 billion. With that purchase came all of its related intellectual property, as well as more than 2,000 employees. That should certainly give it a head start.
It seems clear that Apple is taking control of its own destiny. It's been taking steps down that path for a while, first with the chips in the iPhone and iPad, then with Apple Silicon for the Mac — which the company announced back at its Worldwide Developer Conference and debuted last month — and now with modems.
It certainly makes sense that Apple wants to control the important pieces that make up its devices. Apple is the most valuable company on earth, with a market cap of more than $2 trillion. With the acquired Intel assets, Apple has the resources and know-how to bring modem production in house, just like it did with Apple Silicon.
In addition, modems are complex and a major draw of power, especially the 5G version. That leaves plenty of room for improvement — something that certainly isn't lost on Apple.
Could Apple design a chip that both better integrates with its A-series processors and extends battery life? It wouldn't surprise me. This could be significant considering the fastest version of 5G, known as ultra-wideband, is much more power-hungry than LTE. That's a big deal in a device like the iPhone 12 mini, which already suffers from shorter battery life due to its smaller size.
Apple, with the M1, has already shown it's far better at designing and manufacturing low-power chips than either Intel or Qualcomm. That allows the company to achieve better performance with less power consumption. In a mobile device that's important, since people tend to use them for long stretches at a time before plugging them in to charge. Battery performance and battery life is reason enough to think that Apple would much rather bring production in house.
That said, I think there's a more interesting use case.
I think that it's possible we could see Apple finally preparing the way to add 5G cellular capabilities to a Mac. I suspect the most likely candidate is some future version of a MacBook Air.
So far, Apple has resisted adding cellular capabilities to its laptops, despite other manufacturers moving in that direction, but Apple has never been in a hurry to be first to adopt new technology with edge use-cases. That's exactly what 5G remains for most people until it's more widely available. It looks great on paper, but it's not exactly practical, or even meaningful, yet.
Even in the case of the iPhone 12, which includes Qualcomm's 5G modems, most people aren't living in an area where they can take advantage of the fastest versions. I even tested out the only 5G laptop I'm aware of, the Lenovo Flex 5G. It certainly seemed like an interesting idea, but not only was it severely lacking when it came to processing power (due mostly to the Qualcomm Snapdragon 8cx processor), I never once found a spot where it was able to take advantage of Verizon's 5G network.
Another potential reason Apple hasn't rushed in this direction is the way Qualcomm charges its licensing fee, which has traditionally been based on the total price of the device. That means that in addition to paying for a modem, Apple is also paying a fee for the license. That's one thing in an $800 or $1,000 iPhone, but something else in a MacBook Air or MacBook Pro, which can easily exceed $2,000 or more at the high end.
That was largely the reason Apple sued Qualcomm in the first place, meaning it's likely addressed in the settlement. Still, there was never a reason to pay Qualcomm a piece of the profit on a MacBook with 5G when it wasn't something anyone could use anyway. That's starting to change.
Also, the M1 Macs — at least the portable flavor — are finally capable of actual all-day battery life. That's without any change in the battery, just swapping in a more efficient processor. It isn't hard to imagine that whatever comes next, both in terms of form factor and processor design, will continue to escalate that trend line in a positive direction. As Apple is able to get more gain in margin from the battery, it starts to make sense to spend some powering a modem that allows for anywhere access.
Granted, "anywhere access" isn't super high on anyone's list of needs right now while we're all working from home. That, hopefully, will change in the next six or eight months. When it does, people who have been working from home might want to get out of the house, but that doesn't mean they'll all be in a hurry to race back to the office.
A MacBook Air with all-day battery life plus LTE or 5G wireless would be the perfect remote work device. It's true that we aren't quite there yet, but that doesn't mean it wouldn't be smart for Apple to try.
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