(Reuters) – Apple Inc. (AAPL.O) has had talks with Samsung Electronics Co Ltd (005930.KS) and MediaTek Inc. (2454.TW) as well as the existing supplier Intel Corp (INTC.O) to provide chips of 5G modem for the 2019 iPhones, according to the testimony of an Apple executive at a trial between Qualcomm Inc. (QCOM.O) and the US Federal Trade Commission on Friday.
FILE PHOTO: A chef walks past an Apple Store in Beijing, China, January 7, 2019. REUTERS / Thomas Peter
Between 2011 and 2016, Apple relies on Qualcomm, based in San Diego, as the exclusive provider of such chips, which help iPhones connect to wireless networks. Starting in 2016, Apple split the business between Intel and Qualcomm, but in 2018, Apple only migrated to Intel for its new phones.
Tony Blevins, head of supply chain at Apple, said Friday that Apple had also considered MediaTek and Samsung, one of its major competitors in the smart phone market, to provide chips for the next generation of wireless networks called 5G. These networks are expected to begin deploying this year and provide faster data rates than current 4G networks.
The FTC sues Qualcomm, alleging that the chip vendor had adopted anti-competitive patent licensing practices in order to maintain a dominant position in the high-end modem chip market.
At a trial in front of a federal courthouse in San Jose, California, Blevins said that Apple had long been looking for several vendors for the modem chips, but had signed an agreement with Qualcomm for the exclusive supply. chips because the chip vendor offered large discounts on exclusive license fees.
In 2013, Apple shut down with Intel to start providing modems for the iPad Mini 2, as Apple would lose its discounts by using Intel's chips, which would make Intel's products "economically unattractive."
Later in the year, after cost negotiations with Qualcomm failed, as Apple hoped, Apple launched "Project Antique" to secure a second modems provider, Blevins said.
In 2016 and 2017, Apple introduced the Intel modems in some of its iPhones, but also uses Qualcomm chips. But the lawsuit filed by Apple against Qualcomm in early 2017 caused a very profound and negative change in their business relationships, which led to the exclusive use of Intel modems for phones launched last year.
"The whole concept of Project Antique was to find a second supplier. No infringement to (Intel), but we do not want to be a sole supplier with them. We wanted both Qualcomm and (Intel) in the mix, "said Blevins." Blevins also said that Apple had planned to make Intel the only modems provider for Apple Watch, which added 4G connectivity to 2017 with the help of Qualcomm chips.
Blevins said discussions with Samsung, whose Galaxy and Note devices compete with the iPhone, are "not an ideal environment" for Apple, but that Samsung is currently the largest component supplier for Apple.
Blevins did not specify whether Apple had made a decision regarding a 5G modem provider or whether it would issue an iPhone 5G by 2019. Citing sources, Bloomberg had previously announced that Apple would not publish a such phone before 2020.
Stephen Nellis report; edited by Susan Thomas and James Dalgleish