Can Intel win in 5G?

The battle for the modems that power mobile devices is intense and shows no sign of letting up as we move towards 5G. But success for Intel may not take the traditional path.

5g wireless mobile data connection
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Intel is a major supplier of 4G and soon 5G modems to smartphone OEMs around the world (including Apple), although currently Intel’s share of the modem market in less than 10 percent. It competes with a number of other suppliers, most notably Qualcomm who has the majority share of modems in high to mid tier smartphones (Qualcomm’s share is estimated at approximately 50 percent of the overall market), as well as MediaTek and other Far East suppliers.

As the 5G revolution approaches (I expect widespread deployments achieving critical mass in 2020–2021) it’s important to look at who some of the chip vendor winners will be. While competitive, it’s likely that the modem market will remain difficult for anyone competing against Qualcomm, Intel included. Qualcomm’s high performance Snapdragon chips are dominant in the mid to high end of the smartphone market. And the fact that Qualcomm tightly couples its modem capabilities with its Snapdragon chips gives it a competitive advantage. But that’s not the whole story in who wins supplying chips to 5G.

It’s not just about phones

The coming upgrade to 5G infrastructure will require that wireless network providers spend dramatically on software defined networking (SDN) and network function virtualization (NFV) powered infrastructure. And here, Intel is a clear winner with its emphasis on its new Xeon Scalable data center platform tuned for networking, its 3D XPoint high speed SSDs and the coming Optane memory along with internal bus improvements. It’s likely that most carriers will acquire a very significant number of Intel powered systems to run their data centers and offer a wide range of services to customers that could not be accomplished with older style dedicated switching gear. Intel will work with all of the traditional carrier infrastructure vendors (e.g. Cisco, Siemens, Nokia) to help make this transition, as well as enabling custom solutions directly with the major carriers.

Infrastructure processing power will be critical

All 5G network providers will become Software companies running a large number of services tailored to specific customers in a cloud-like data center environment rather than in old rack mounted dedicated function hardware. Each high end data center chip powering one of these servers probably represents revenues equivalent to hundreds, if not thousands of modem chips installed in phones, as high end data center chips can sell for as much as $5,000 to $10,000 each. And that doesn’t include all the massive SSD storage arrays that will be sold along with the CPU, which could easily run into the high tens of thousands of dollars.

It’s likely most large scale carriers will need thousands of servers running their networks, so this is a huge potential for Intel and its partners selling into the telecom segment. Intel has a long history of supplying components to the major carrier infrastructure providers, and a close working relationship directly with most of the major carriers. Indeed, AT&T announced that it has been using a new Intel Xeon Scalable based system in production for several months that delivered a 30 percent performance improvement over older systems and a 25 percent reduction in the number of servers needed per cluster while offering a larger data throughput, thus improving overall TCO. And this doesn’t even address all of the new services in security, data analytics and management functions that can now be offered “as a service” running on these new platforms that could never be offered by the networks providers to their customers on previous generations of dedicated function hardware. This is a compelling argument to increase spending on updating the network infrastructure as they prepare for 5G.

Bottom line: There will continue to be a battle in the modem chip market for placement in new phones that takes advantage of network improvements. And the “specsmanship” battle that claims one device is better than another will continue. It’s unlikely that Intel can dethrone the current leaders in the modem chip suppler space, even though it’s likely to increase its market share. But it’s becoming clear that a large share of the costs involved with next generation network upgrades will be about enabling the infrastructure. And here, with its leadership in powering high performance data center and cloud-enabled platforms, Intel will capture a commanding portion of the revenues to be spent.

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