Tuesday, September 10, 2019
Everybody is looking toward the Apple event on September 10th, expecting new iPhones. Those phones will certainly not support 5G. While 5G rollouts are ramping up, I wanted to take stock of the situation in their preparedness for 5G phones and specifically how they are placed from the modem perspective.
Since Apple announced the deal to buy Intel’s failed modem business there has been much analysis of the reasons and the merits of the deal. My opinions were quoted in CNBC and NBC. The real question now is, “Can Apple turn around the lagging Intel modem technology, and develop a competitive modem?”
Modems are the embodiment of the wireless standards developed by the industry body 3GPP (3rd Generation Partnership project). 3GPP adopts the best technologies among numerous proposals from its members into standards. If one wants to be modem leaders, they’ve got to be leaders in standardization.
Standards leadership allows companies to incorporate their technology into standards, which gives them a significant head start against the competition in productizing that technology. Such leadership requires not just modem competence, but end-to-end systems expertise, built over many years with large, sustained investments. Additionally, it requires close collaboration with other 3GPP members to build trust through open sharing of ideas, intentions, objectives, and aspirations.
Apple is famous for its penchant for secrecy. Most of its leading technologies are proprietary that work within its own ecosystem. So, to be a modem leader, Apple has to fundamentally change its approach to technology development.
Modem performance is of paramount importance today and will be even more so in the future, when 5G goes beyond smartphones to connect industrial IoT, and mission-critical services. No market leader wants to be seen as a laggard. If you fall behind it is extremely hard to catch-up. Intel is a vivid example of how this can be catastrophic.
Intel has a reasonably good modem, albeit with inferior performance compared to market leaders. Apple has to start afresh on 5G. That means they are at least a couple of years behind competitors such as Qualcomm, Samsung, Huawei, MediaTek, and others. It’s an open question on how fast they can catch up.
Substantial ongoing investments
Modem leadership is a perpetual battle that you have to keep winning. The technology changes at a rapid pace. That means significant ongoing investments, to the tune of one billion dollars or more every year, just for development, excluding other go-to-market expenses.
A billion-plus dollars is chump change for Apple, but its modem operations could still be a drain if the operation can’t show results quickly, especially when all of the company’s investors are eagerly monitoring the progress. Additionally, Apple, with its modest team of a couple of thousand modem engineers, must compete against companies such as Qualcomm, whose main focus is the modem, and whose teams are many folds bigger than those of Apple. The same is true about the focus as well.
Integrated or Stand-Alone modem
The biggest advantage of owning your modem is the possibility of integrating it into an SoC, and benefiting from the power, performance, and size advantages thereof. Else, it is no different than using a third-party modem (e.g., from Qualcomm). It is a safe bet that sooner or later, Apple will integrate Intel’s 4G modem into their A-series app processors, as both are based on the Arm architecture.
But integrating a 5G modem is a far more complex situation. Apple has signed a multi-year modem deal with Qualcomm. If Apple wants to integrate its 4G LTE modem early, then it has to rely on Qualcomm giving them 5G-only modems, similar to the X50, Qualcomm’s first-generation 5G modem. Of late, Qualcomm has been making multimode (4G+5G) modems, which complicates Apple’s integration plans until they make their own 5G modem. It is not clear whether their contract with Qualcomm guarantees 5G-only modem supply. Else, Apple has to resort to multiple SKUs (4G only and 5G) for different markets and configurations.
Aligning modem and app processor roadmaps
The cadence at which Apple’s app processor and modem technology evolve is different. This means if they decide to do integration, they have the additional complication of aligning their app-processor roadmap with that of cellular technology. That will be a significant change to their roadmap planning process, as it puts them at the mercy of 3GPP developments, over which Apple has no control. For example, the acceleration of the 5G timeline in 2016 was a total surprise. Any such sudden change would be very disruptive to Apple’s overall products plans.
The other option would be for Apple to follow Qualcomm's model of making the first version of any new cellular technology a stand-alone modem and then integrating into an SoC in the next version.
5G requires modem-to-antenna system (RF)
With the advent of 5G, especially with millimeter-wave (mmW) bands, the fates of modem and RF have become inseparable. The massive MIMO, beamforming, and steering, RF transmit power management, and many other functions have become so critical that without comprehensive modem-to-antenna system design, it is almost impossible to win.
The deal with Intel only gave Apple the technology and products for the baseband or digital part of the modem, but not RF. Traditionally, Apple has relied on third-party RF solution providers such as Qorvo, Broadcom, and Skyworks. But integrating a third-party mmWave RF with the modem is a significant challenge. I wouldn’t be surprised if Apple is already looking into gobbling up an RF company soon.
Investment modem commands a significant portion of the phone cost (BoM – bill of materials). So, owning it will save Apple a good amount of money because of their volume. However, it is much smaller when you compare it to their modem competitors, such as Samsung, Huawei, or Qualcomm. That means they will amortize their significant modem investments on a smaller device volume. Considering that, it will be interesting to see how much cost they save and what kind of ROI (return on Investment) they achieve on modem business.
This is just a short list of challenges Apple will face. The path to modem redemption is filled with carcasses of companies that have tried and failed — Broadcom, Renesas, Nvidia (Icera), ST Ericsson, Motorola, and now Intel (Infineon). Can Apple defy the odds and succeed? Do its market power, financial strength, and brand equity help in this endeavor? Time will tell.
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