In recent court documents Intel blames former rival Qualcomm for anticompetitive business practices that caused it to lose billions of dollars and forced the sale of its smartphone modem chip business to Apple at a fire-sale price of $1 billion.
Intel’s claim was made in protest to Qualcomm’s appeal of a ruling earlier this year that its anticompetitive practices had harmed competitors and that its licensing practices had to be changed.
In a post titled Why the Decision Against Qualcomm Should Stand — Steven Rodgers, executive vp and general counsel at Intel says, “Intel fought for nearly a decade to build a profitable modem chip business. We invested billions, hired thousands, acquired two companies … Intel could not overcome the artificial and insurmountable barriers to fair competition created by Qualcomm’s scheme and was forced to exit the market this year”.
The Qualcomm appeal is expected to begin in early January 2020. A group of automakers and auto-parts suppliers also filed statements against Qualcomm saying that its licensing practices would result in higher car prices.
Intel has far more experience in defending itself against claims of antitrust than complaining about being the victim of anticompetitive practices. In this unusual situation for Intel, it not only had to deal with a formidable competitor in Qualcomm but it also faced significant design and production challenges in its modem chip group.
Wireless communications has been historically a very tough business for Intel spanning several decades and many failures. In 2006 it sold it gave up and sold its Communications business to Marvell for $600 million — also at a large loss, after many years of acquisitions and large operational investments.
Wireless communications chips are notoriously hard tomato and integrate with processor designs because of the specialist manufacturing technologies. Intel’s fabs are designed primarily to produce high yields of processor chips and related integrated systems that share the same CMOS manufacturing process.
Intel’s enthusiasm for a decade-long loss-making smartphone chip business was further challenged by high demand and a shortage of manufacturing capacity for its lucrative microprocessors. Increasing production is very expensive in the chip business requiring billions of dollars. Once built the chip fabs have to be run at full capacity to be profitable. Intel has to make sure the demand is real and not inflated before committing to the capital expenditures.
This is why Intel builds the shells of its fabs first and then waits until the last moment before installing the hugely expensive chip manufacturing equipment.
Intel could save as much as $1 billion in annual operational costs following the sale of its smartphone business to Apple.