Intel brings forward launch of 5G modem in bid to silence doubters

Apple’s decision to go all-in on Intel modems comes with a lot of pressure, so Intel is desperate to convince us it’s up to the task.

A week ago reports appeared to confirm that Apple’s first 5G phones will come in 2020 and will exclusively use Intel modems. Telecoms.com was among the commentators asking whether or not this would turn out to be a rash decision by Apple, with rival Qualcomm expected to be ahead in the 5G modem race.

Intel seems to have taken this scepticism as a personal challenge and has consequently announced it will now be launching it more than half a year sooner than previously thought. The Intel XM 8160 5G modem will now be released into the wild in the second half of 2019, although there’s nothing in the announcement to indicate it will power an iPhone that soon, with the September 2020 models still the likely recipients.

In fact Intel says the earliest you will see it in devices is in the first half of 2020, which does beg the question of whether this ‘bringing forward’ of the launch is purely cosmetic. Could Intel have merely tweaked the definition of ‘launch’ to allow for some kind of meaningless soft-launch six months earlier. Maybe Qualcomm will retaliate with a similar move.

“Intel’s new XMM 8160 5G modem provides the ideal solution to support large volumes for scaling across multiple device categories to coincide with broad 5G deployments” said Cormac Conroy, GM of Intel’s Communication and Devices Group. “We are seeing great demand for the advanced feature set of the XMM 8160, such that we made a strategic decision to pull in the launch of this modem by half a year to deliver a leading 5G solution.”

The fact that the XMM 8160 is ‘multimode’, supporting 5G NR in SA and NSA modes across multiple frequencies, as well as legacy wireless standards is something Intel is keen to flag up. So much so it did a special diagram.

The Intel XMM 8160 5G modem will offer very clear improvements in power, size and scalability in a package that will be smaller than a U.S. penny. It will be released in the second half of 2019, and it will support the new standard for 5G New Radio (NR) standalone (SA) and non-standalone (NSA) modes as well as 4G, 3G and 2G legacy radios in a single chipset. (Credit: Intel Corporation)

Qualcomm shares fall on concerns about its dispute with Apple

Mobile chip giant Qualcomm delivered fairly solid quarterly numbers but it lowered its outlook thanks mainly to Apple.

A slight year-on-year fall in revenue was still better than expected, as were its earnings per share. But guidance for the next quarter was reduced by around 20% for both chip shipments and licensing revenues. Apple seems to be to blame for both, with the gadget giant switching to Intel for its modems and the ongoing dispute over licensing terms resulting in a bunch of payments being withheld.

Qualcomm Q3 outlook

“We delivered a strong quarter, with Non-GAAP earnings per share above the high end of our prior expectations, on greater than expected chipset demand in QCT and lower operating expenses,” said Steve Mollenkopf, CEO of Qualcomm. “We are executing well on our strategic objectives, including driving the commercialization of 5G globally in 2019 and returning significant capital to our stockholders.”

Despite this Qualcomm’s share price was down 7% at time of writing. Speaking to Reuters, Qualcomm’s CFO George Davis speculated that the chip shipment downgrade might have been greater than many anticipated. On top of that the dispute with Apple is showing no sign of resolution, so investors may be increasingly inclined to price in a negative outcome for Qualcomm.

Apple reportedly plans to use Intel 5G modem in 2020, but will it be any good?

Apple has boxed itself into a corner by going to war with Qualcomm, so a lot rides on the competitiveness of Intel’s 5G modem.

Fast Company has reported that Apple intends to use the Intel 8161 5G modem in its 2020 iPhones as part of its already-known strategy of switching to Intel as its sole provider of modems. This move seems to be largely driven by Apple’s dispute with Qualcomm over how much it charges for its chips.

When large companies declare legal war on each other the dispute usually metastasises as their respective legal teams search for further dirt they can use as leverage in the ongoing negotiations. These things usually conclude in an out-of-court settlement, the terms of which are largely determined by the relative legal strength of the respective positions.

The more likely one party is to win a court case, the stronger its position in the pre-case negotiation, which is why Qualcomm has been so keen to prove that Apple committed industrial espionage in sharing Qualcomm trade secrets with Intel in order to help it produce better modems.

While Qualcomm’s most recent court filing broadly outlines fresh allegations resulting from the discovery process, conversations we had at its recent event in Hong Kong suggested Qualcomm has got hold of emails that prove the alleged passing on of protected intellectual property took place.

If Apple did indeed offer Intel a helping hand, something that Intel denies, then the clear inference is that Intel’s modems were of insufficient quality without cheating. A worst case scenario might be that the 5G modems Apple apparently intends to use would be declared illegal, but even if that doesn’t happen there will be questions over the 5G performance of those iPhones versus phones running Qualcomm modems.

So, assuming this rumour is accurate, a hell of a lot is riding on those first Intel 5G modems. If they’re rubbish then not only will that be a direct competitive win for Qualcomm, but the sales and reputation of the iPhone are likely to suffer too. In its desire to dominate its suppliers Apple is forcing itself to make some technology choices that may be far more costly than any money saved on components.

Smartphone market continues to plunge, with Samsung worst hit

Samsung’s smartphone shipments have declined for the past four quarters and the overall market has followed.

At the same time Huawei continues to go from strength to strength. Annual smartphone shipment growth of 41% allowed Huawei to take second place in the global rankings last quarter and 32% growth this quarter was enough to keep Apple at bay once more. Samsung’s shipments declined by 13% this quarter and if these trends keep up Huawei could grab the top spot before long – a previously unthinkable event.

“Global smartphone shipments tumbled 8 percent annually from 393.1 million units in Q3 2017 to 360.0 million in Q3 2018,” said Linda Sui of analyst firm Strategy Analytics. “The global smartphone market has now declined for four consecutive quarters and is effectively in a recession. The smartphone industry is struggling to come to terms with heavily diminished carrier subsidies, longer replacement rates, inventory buildup in several regions, and a lack of exciting hardware design innovation.”

“Samsung is losing ground to Huawei, Xiaomi and other Chinese rivals in the huge China and India markets,” said Neil Mawston of SA. “Samsung must solve its China and India problems before it is too late. Huawei remains the world’s second largest smartphone vendor with 14 percent share. Huawei has little presence in the valuable North America market, but its Android models are wildly popular in most of the rest of the world, particularly Asia and Europe.”

One interesting twist to the numbers was Apple’s decision to stop reporting shipment numbers from next quarter onwards. Since this is always its strongest quarter you have to wonder what Apple is playing at. “Starting with the December quarter, we will no longer be providing unit sales data for iPhone, iPad and Mac,” said Apple CFO Luca Maestri on the earnings call. “As we have stated many times, our objective is to make great products and services that enrich people’s lives, and to provide an unparalleled customer experience so that our users are highly satisfied, loyal and engaged.

“As we accomplish these objectives, strong financial results follow. As demonstrated by our financial performance in recent years, the number of units sold in any 90-day period is not necessarily representative of the underlying strength of our business. Furthermore, a unit of sale is less relevant for us today than it was in the past, given the breadth of our portfolio and the wider sales price dispersion within any given product line.”

Fair enough but the market will be the judge of how relevant Apple’s unit shipment numbers are. Companies like Strategy Analytics will still publish estimates and journalists will still write about them. Apple was one of the few smartphone vendors that still published its numbers so maybe it has decided, as has LG, to get in line with its competitors on this, with the overall declines in the smartphone market possibly contributing to that decision. But the weak reasoning offered above will leave many unanswered questions in the minds of investors.

Smartphones Q3 2018

Apple shares fall 5% on weak forecast

With Apple pointing the finger at fluctuating currency, poor performance in emerging markets and supply issues, its busiest quarter might not be as busy as investors had hoped.

While CEO Tim Cook has defended the soundness of the supply chain, worries over whether the business can keep up with demand over the final quarter leading into Christmas seem to have spooked investors. Combined with warnings over performance in emerging markets as well as volatile currencies around the world, the team has stated it might miss guidance over the next three months, sending share price down 5% in afterhours trading.

“The emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia,” said Cook. “These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see.”

India should be seen as quite a worry for the iChief’s as while the country has been undergoing its own digital revolution over the last 18 months, Apple seem to be missing out on the biggest rewards. With India now being the second-largest smartphone market in the world, but with half the penetration of China, the opportunities are clear. Despite attention from Apple, it’s opening new production facilities and shops across the country, according to data from Canalys it is yet to break into the top-five smartphone brands.

Shipments in India across the most recent quarter dropped by 1%, though Xiaomi grew 31.5% year-on-year to claim the number on spot, at the expense of Samsung, where shipments dropped 1.6%. Vivo, Oppo and Micromax complete the top five, while the ‘others’ saw shipments decrease 34%. The Chinese brands seem to have found the right recipe to appeal to the Indian user, while Apple is still searching for the sweet spot.

“To give you a perspective in of some detail, our business in India in Q4 was flat,” said Cook. “Obviously, we would like to see that be a huge growth. Brazil was down somewhat compared to the previous year. And so I think, or at least the way that I see these, is each one of the emerging markets has a bit of a different story, and I don’t see it as some sort of issue that is common between those for the most part.”

One market where this isn’t the case is China, with the business growing 16% year-on-year. On the money side of things, it certainly is a different story. Total revenues across the business grew to $62 billion, an increase of 20% over the same period in 2017, though guidance is not as positive. Cook expects Apple to pocket between $89 billion and $93 billion over the next three months, though Wall Street has generally been hoping $93 billion would be the bottom end of the guidance.

Looking at the explanation, CFO Luca Maestri has pointed to four areas. Firstly, the team have launched products in reverse order compared to last year. Secondly, with many international currencies depreciating against the US dollar, Maestri anticipates a $2 billion headwind as a result. Thirdly, due to the number of products Apple has pumped into the market, the team is nervous about supply/demand. And finally, at the macroeconomic level in some emerging markets consumer confidence is not as high as it was 12 months ago.

Heading back to the positives, Apple is making more money now than it was a year ago. Despite there being no shipment growth in any of the major product lines (iPhone was flat year-on-year, iPad was down 6% and Mac was down 2%), Apple is still a money making machine. iPhone revenue increased 29% thanks to ridiculously high unit costs, while the services business was up 17%. This is an area which will be of significant interest to investors, as there is only so much Cook and co. can increase the price of iPhones to compensate for flat growth.

As part of the services division, the App Store has been trundling along positively, though with companies like Netflix and Fortnite stating they would be circumnavigating both the App Store and Google Play, all involved will hope this does not encourage others to do the same. Cook pointed out that the largest developer only account for 0.3% of revenues at the App Store, losing one or two won’t matter, but if the trend spreads too far the product might find troubling times ahead.

Overall, Apple is still in an incredibly dominant position, though the inability to capitalise on opportunities in the developing markets should be a slight worry.

Apple Financials

Apple Products

Trufone and Redtea among the first to exploit the Apple eSIM opportunity

Apple’s support of eSIM in its latest iPhones promised to kick-start that market and a couple of specialist companies are leading the way.

UK outfit Truphone, which recently raised £18 million in funding, valuing the company at £386 million, has just launched what it claims is the first eSIM app for the new iPhones. The app exploits the ease and flexibility promised by eSIM to allow users to purchase instant local connectivity for their devices in 80 countries.

“eSIM technology represents a step-change in users’ relationship with their network operator,” said Trufone CEO Ralph Steffens. “By letting people run multiple plans and change operators without having to wait for a traditional SIM card to be delivered, the eSIM is swinging the power balance back in favour of the consumer. By offering our ready-to-go SIM provisioning platform to other mobile operators, we are facilitating a new era of consumer-first mobile plans.”

But Chinese company Redtea Mobile has been doing this stuff for a while too and has a service called eSIM+. It’s a fairly straightforward web platform that allows you to buy connectivity in over 60 countries and requires you to scan a QR code to activate it. Redtea has apparently already activated 100 million eSIMs in China and is now looking further afield.

Possessing only and antiquated Samsung Galaxy S7, we have been unable to put either service to the test, but they both seem pretty straightforward. Trufone’s app seems easier and more intuitive than Redtea’s web platform/QR code combo , but then again you can get 1GB in the UK on eSIM+ for $13, while the deal will cost you £15 with the Trufone app. Both seem worth a look if you have a new iPhone.

Italian watchdog bares its gums in Apple and Samsung planned obsolescence case

Italian regulator AGCM has shown its bite is particularly toothless after fining Apple and Samsung €10 million and €5 million respectively over planned obsolescence.

Following a ten-month investigation for unfair commercial practices, the watchdog found the pair guilty, though after months of barking the bite has proven to be as gummy as a 70 year-old Welwyn Garden City pensioner. For many companies the fines would be considered monstrous, but for these two, it will barely register a blip on the financials.

The statement from the AGCM reads as follows:

“As a result of two complex investigations, the AGCM has ascertained that the companies of the Apple group and of the Samsung group have realized unfair commercial practices in violation of the articles. 20, 21, 22 and 24 of the Consumer Code in relation to the release of some firmware updates of mobile phones that have caused serious malfunctions and significantly reduced performance, thereby accelerating the process of replacing them.”

In Samsung’s case, the watchdog believes the company insisted users who had purchased a Note 4 to install the new Android firmware called Marshmallow, which was designed for the Note 7, but failed to inform of serious malfunctions due to the greater stress on the device.

Apple told the owners of various models of iPhone 6 to install the new iOS 10, which was developed for the iPhone7, without informing the greater energy demands of the new operating system and the possible inconveniences, such as sudden shutdowns. To counter these issues, a new update was released without warning that its installation could reduce the speed of response and functionality of the devices.

In a second investigation of Apple, AGCM found the iLeader did not provide consumers with adequate information about some characteristics of the batteries, such as their average life and deterioration, nor the correct procedures to maintain, verify and replace the batteries to preserve the full functionality of the devices.

Just to put the fines into some perspective, it would take Apple approximately 20 minutes to pay off the €10 million fine, while Samsung would take around 16 minutes to pay off its €5 million penalty.

The issue with these fines is the severity. Apple and Samsung have failed in their responsibilities to their customers, and should be punished. However, these are monstrous companies with unthinkably large bank accounts. Fines should be proportional to the size of the company, otherwise fear will not be instilled.

Fines are supposed to act as a deterrent for any wrong-doing in the future. Considering how minor these penalties are in comparison to the annual turnover of Apple and Samsung, what is to stop them from continuing to edge along the line of right and wrong.

Unfortunately this is the current state of play. Regulators can try to protect the consumer, but until they are given the power to effectively and proportionally punish wrong-doers, nothing will change. This is not the last time Apple and Samsung will be caught doing something wrong, and it’s because they are effectively being allowed to get away with it.

 

Amazon, Supermicro and Apple call BS on Chinese spying sting – someone is lying

Amazon, Supermicro and Apple have released statements denying they have ever found any malicious microchips on their hardware calling into questions the validity of Chinese espionage claims.

Yesterday Bloomberg pulled back the curtain on an apparent three year-old US government into one of the most intrusive and intricate espionage campaigns, fuelled by the Chinese government. Should the claims be proven true, it would certainly add weight to the political paranoia which has been whipping the anti-China rhetoric into a frenzy, though the major players have denied all knowledge of the malicious microchips and the resulting investigation.

“As we shared with Bloomberg BusinessWeek multiple times over the last couple months, this is untrue,” said Steve Schmidt, Chief Information Security Officer at Amazon. “At no time, past or present, have we ever found any issues relating to modified hardware or malicious chips in SuperMicro motherboards in any Elemental or Amazon systems. Nor have we engaged in an investigation with the government.”

“Supermicro has never found any malicious chips, nor been informed by any customer that such chips have been found,” Supermicro said in a statement. “The manufacture of motherboards in China is not unique to Supermicro and is a standard industry practice. Nearly all systems providers use the same contract manufacturers.”

“Over the course of the past year, Bloomberg has contacted us multiple times with claims, sometimes vague and sometimes elaborate, of an alleged security incident at Apple,” an Apple statement reads. “Each time, we have conducted rigorous internal investigations based on their inquiries and each time we have found absolutely no evidence to support any of them. We have repeatedly and consistently offered factual responses, on the record, refuting virtually every aspect of Bloomberg’s story relating to Apple.”

While the entire saga is now a bit hazy, one thing is clear, someone is lying and misleading the general public.

Would China compromise ‘Workshop of the World’ position?

It is not difficult to believe the Chinese government would conduct such campaigns. It is generally accepted the Chinese government monitors the activities and communications of its own citizens, therefore it is not a huge stretch of the imagination to believe it would do so for foreign countries. But, would the Chinese government put its valuable position as the ‘Workshop of the World’?

With roughly 75% of smartphones and 90% of PCs manufactured in the country, any accusations of espionage would certainly force companies to reassess their supply chain. What company would buy hardware if they knew the potential for data breaches? It would be commercial suicide. China surely knows this, but it depends on what it places more importance on; securing intelligence from foreign governments and multinational corporations, or maintaining stability for a very lucrative industry for the country.

This is not to say they wouldn’t, but it would have to accept it would be sacrificing an important and profitable role in the global supply chain, one which it has worked hard to dominate.

Amazon, Supermicro and Apple clearly have a lot to lose

Another denial here is nothing which should come as a surprise. Should there have been a confirmation, the trio would haemorrhage customers.

Amazon AWS’ government business is a big earner, but how many would trust the services if there was a threat of espionage. The same could be said of corporate clients who are incredibly protective of trade secrets. Supermicro manufactures motherboards for more than 900 customers around the world, clearly this would be incredibly damaging to its reputation. For Apple, and Amazon as well, the PR damage for the consumer business could be a disaster. Consumers would be very wary, which combined with the high-prices Apple tends to charge, could possibly turn the public to other brands.

Each company has a lot to lose by admitting it has been compromised. There was of course going to be a denial, especially considering this investigation has not been confirmed by the government. If it does turn out to be true, the trio can simply state they were under non-disclosure agreements and a denial was necessary for national security, even if it was a lie.

A convenient revelation for the US government

Just as President Trump is going on the offensive against the Chinese government with tariffs and company bans, the story emerges. To say it is convenient timing is somewhat of an understatement.

Just last month, Trump upped the ante on the Chinese trade war by introducing tariffs on another $200 billion of imports. This adds to the initial $50 billion which was announced earlier in the year. With the price of imports increasing, and the option of domestic manufacture more expensive, the price of certain consumer goods will soon begin to rise. Trump will soon need to justify to US citizens why it is important to swallow these price increases, and an espionage scandal would certainly fit the bill.

Another interesting aspect is on the 5G side of things. With Huawei banned from any meaningful deployment or contracts, the risk is reduced competition which could potential lead to increased prices and slower deployment. Ghost stories about the naughty Chinese will only get the government so far, Trump will soon need a concrete reason for banning Huawei and ZTE from the fray. The malicious microchips provide justification here as well.

Not everyone can be right

Right now the validity of the claims is hazy. There are of course strong arguments for all, some suggesting they are telling the truth and some as evidence of lies, but right now, who knows.

With the intelligence community and the White House remaining quiet, rumours will continue to swirl. Until this confirmation or denial for the investigation is unveiled, the conspiracy theorists will be typing away. Of course, a confirmation or denial will not stop the conspiracy theorists, but it will at least provide some clarity for the rest of us.

Intel triggered into joining Qualcomm Apple spat

Qualcomm has accused Intel of cheating at modems with Apple’s help, but Intel’s weak public riposte is unlikely to sway much opinion in its favour.

Judging by the general quality of their press releases all three of the companies involved in this spat refuse to issue a single public utterance until every syllable has been pored over by battalions of lawyers. As a consequence, when they decide to slag each other off via the media the result falls pretty far short of Wildean in its wit.

To be fair to Qualcomm, its latest allegations weren’t strictly public, although you have to wonder what the source of the court filing leak that resulted in the rest of the world knowing about it was. Essentially Qualcomm is questioning how Apple was able to replace its modems with Intel ones in the latest iPhones and figured it must have given Intel trade secrets to ensure its modems were up to the job.

Intel’s General Counsel Steven Rodgers posted a riposte entitled ‘Qualcomm’s Rhetoric Pierced’, which promised all kinds of rebuttals, refutations and rebukes but instead delivered a disappointingly generic whinge that amounted to ‘how dare you?’ It started fairly promisingly with a round up of all the fines Qualcomm has been hit with over the past couple of years for violating competition laws.

But then it degenerated into a general purpose moan about how unfair the allegations are when everyone at Intel works really hard, actually. “We are proud of our engineers and employees who bring the world’s best technology solutions to market through hard work, sweat, risk-taking and great ideas,” pouted Rodgers. “Every day, we push the boundaries of computing and communication technologies. And, the proof is in the pudding: Last year, the U.S. Patent Office awarded more patents to Intel than to Qualcomm.”

The correct form of the proverb is ‘the proof of the pudding is in the eating’, but if Intel chooses to keep its patents inside some form of dessert, who are we to judge? “For the most part, we have chosen, and will continue to choose, to respond to Qualcomm’s statements in court, not in public,” said Rogers, showing the acute judgment that you would expect of a senior Lawyer. Qualcomm has yet to publicly respond.

Qualcomm points the industrial espionage finger at Apple

The long-running legal battle between Qualcomm and Apple has been stepped up a level as the chipmaker effectively accuses the iLeader of industrial espionage.

After Apple released the iPhone XS without a shred of Qualcomm technology inside, it was only going to be a matter of time before there was a reaction. In a filing with the Superior Court of California, seen by Bloomberg, Qualcomm suggests Apple leaked trade secrets to Intel to overcome performance and develop a more suitable alternative in its chips.

The accusations come as an amendment to a complaint filed in November, which again suggested Apple broke confidentiality agreements by sharing information with Intel. With the trial already scheduled for April 19, if the judge allows this amendment it could push back the courtroom date. Qualcomm are pushing for the timetable to remain the same however.

The filing states:

“Apple has engaged in a years-long campaign of false promises, stealth, and subterfuge designed to steal Qualcomm’s confidential information and trade secrets for the purpose of improving the performance and accelerating the time to market of lower-quality modem chips, including those developed by Intel. Apple used that stolen technology to divert Qualcomm’s Apple-based business to Intel.”

The initial complaint came from Apple blocking Qualcomm attempts to audit the iPhone maker’s use of Qualcomm’s trade secrets. At the time, Qualcomm suspected Apple was leaking information to Intel, though there was little evidence to support the claim. Apple had requested deep access to its software and tools, but with strict limits on how those products could be used. Apple’s reasoning was to improve the performance of the devices when using Qualcomm chips, though this is now being contested.

While this is the latest chapter in the long-running tale which has seen dozen of complaints and counter-claims lodged with the courts, it all comes down to a single issue. Apple believes the royalties charged by Qualcomm to use its technology in its products are too high. The original argument has blossomed into a complex tapestry, offering collateral damage to other companies in the supply chain, but keeping the legal team at both the technology giants in gainful employment.

Apple first began using Qualcomm chips in 2011, before eventually using them exclusively. In 2016, it started using some Intel chips though due to the difference in performance, it was unable to drop Qualcomm completely. After the legal back-and-forth started in early 2017, the relationship continued to deteriorate until the point Apple decided to exclusively use Intel chips in its devices.

While this is certainly a considerable customer for Qualcomm to lose it does not look like the relationship can be repaired. Reading between the lines, Qualcomm does seem to have accepted this and is looking to salvage something from the disastrous ending. For some, this could be seen as more pressure to force Apple into settling outside the courtroom.

That said, Qualcomm’s loss is Intel’s gain. Securing an exclusive supplier relationship with Apple is certainly a win for the business.