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Solution Providers: $1B Apple-Intel Smartphone Modem Deal Undermines Qualcomm

'I think Intel realizes that they have more to gain by Apple getting rid of Qualcomm modems in iPhones than by trying to build something to beat them on the open market,' one solution provider said of the $1 billion Apple-Intel smartphone modem deal.

Intel's plan to sell a majority of its smartphone modem business to Apple is a smart move on the part of both parties that undermines Qualcomm and opens up new collaboration opportunities for the two companies down the road, solution providers said.

Santa Clara, Calif.-based Intel announced the $1 billion deal with the Cupertino, Calif.-based iPhone maker Thursday, giving both companies a boost in stock price in after-hours trading. The two firms said Apple would receive intellectual property, equipment and 2,200 employees from Intel as part of the deal, which is expected to close in the fourth quarter. Intel will retain the right to build modems for PCs, Internet of Things devices and autonomous vehicles.

[Related: Apple's 8 Newest Products: What You Should Know]

"It’s a pretty smart move from Intel’s perspective: $1 billion richer, undermines Qualcomm, and maybe helps to keep the Apple business for a little while longer," said Michael Oh, founder and president of TSP, a Cambridge, Mass.-based solution provider that works with Apple.

Oh said this deal could also open up collaboration in other areas between the two companies, which would particularly benefit Intel since Apple reportedly plans to start developing its own processors. Apple’s Mac systems currently run on Intel chips.

"Perhaps there is more cooperation in store for these two behemoths of the tech world, rather than Apple cutting off Intel altogether from the Mac," Oh said.

Since Intel plans to continue pursuing 5G from a network infrastructure perspective, it would be interesting to see if Intel and Apple plan to work together on 5G interoperability as part of the deal, Oh said.

"If Intel is successful in getting more of the 5G carrier market [particularly with Huawei losing some of it], then perhaps Apple has access to a significant amount of the value chain on 5G," he said via email.

The deal will allow Apple to wean off of its reliance on Qualcomm — which reached a landmark settlement in April to equip Apple's iPhones with smartphone modems for several years after a contentious legal battle — and potentially build its own smartphone modems, according to Glenn Gruber, senior digital strategist at Blue Bell, Pa.-based Anexinet, No. 218 on the CRN Solution Provider 500.

"I believe that Apple would be very happy to get out from under Qualcomm and either work with more capable partners, or develop this technology in house," Gruber said in an email.

An executive at another solution provider partner of Apple, said will eliminate “Qualcomm hassles” for Apple.

"The deal is a great boost to the Apple hardware roadmap and ensures future 5G functionality without Qualcomm hassles," the executive said in an email, speaking on condition of anonymity. "Just like Apple has done with its other in-house chip designs and acquisitions, I'm wondering if they could also take benefit from the Intel unit to further streamline their modem and other communications needs for their devices. Although, Apple may need to trim down the Intel operations, as they were already losing money even with Apple as a customer."

With Apple likely planning to drop Qualcomm in the future to develop its own smartphone modems, particularly for the 5G market, Oh said the Apple-Intel deal will help Intel undermine Qualcomm.

"I think Intel realizes that they have more to gain by Apple getting rid of Qualcomm modems in iPhones than by trying to build something to beat them on the open market," he said.

However, according to Gruber, Apple could face some hurdles in developing its own modem using Intel's technology.

"The challenge for Apple is that the Intel 4G chip performance lags behind Qualcomm significantly and may be a while before a realistic transition from Qualcomm to an internally developed solution is viable," Gruber said.

Intel declined to comment beyond its intial statment announcing the deal.

CRN also reached out to Apple and Qualcomm for comment and had not heard back as of press time.

Kyle Alspach contributed to this story.

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