Since last week, there have been rumors—first reported by tech blog Engadget—that Huawei, the world's largest telecom equipment maker, would be open to supply 5G modems to Apple for next year's iPhone 5G.
On Saturday, in an exclusive interview with CNBC, Huawei CEO and founder Zhengfei Ren confirmed that the Shenzhen, China-based company is open to selling 5G modems to Apple if the Silicon Valley company makes such a request, marking a strategic shift in the telecom giant's chip strategy.
So far, Huawei has mostly restricted its homegrown chips for its own products including carrier and enterprise-level equipment, smartphones, consumer connected accessories (wireless earbuds, smart eyewear), and smart home devices (WiFi router, smart speaker).
However, the Chinese technology company does supply for specific applications some of its chips to third parties, which a Huawei spokesperson confirmed to me. "But it's not mainstream," he added. "And in the particular case of supplying 5G modems, we will only do this for Apple and not on a mainstream basis."
In addition, at Huawei's annual analyst summit that the Chinese tech company is hosting this week in Shenzhen, Huawei's "rotating" chairman Ken Hu clarified that the competing tech firms have not yet officially discussed the matter. "We don't have any discussion with Apple on this issue," said Hu.
Huawei's CEO comments on potentially partnering with Apple has taken the industry—and people inside of Huawei itself—by surprise.
First, given the U.S. government hostility towards Huawei over security risks, the odds of Apple adopting the Chinese company's 5G modem is close to none.
But, most importantly, an Apple-Huawei partnership over 5G chips would mark a strategic shift for the Chinese company as it will have to provide development and integration support to Apple while significantly scale up its production capacity to accommodate the volume needed by the Cupertino, California-based company.
Actually, we believe that even Samsung will be production constrained to supply—if they chose to do so—their homegrown 5G modem to Apple in addition to their own products.
But for the Huawei CEO, the main reason for such a move is not about the bottom line and winning Apple's business but to make sure that the adoption of 5G is not being slowed down by the lack of a 5G-capable iPhone next year.
Obviously, this is not a concern anymore. Apple and Qualcomm agreed yesterday to end all ongoing litigation, including with Apple’s contract manufacturers, and reached a six-year global patent license agreement and a multiyear chipset supply deal.
With this deal, Qualcomm will supply Apple the upcoming Snapdragon X55 5G modem in time for the release next year of the 5G iPhone while Apple will continue to develop internally its own 5G chipset which we expect could be ready in 5 years—just before the end of its licensing agreement with Qualcomm.
Finally, Intel's decision yesterday to exit the 5G smartphone modem business could actually boost Apple's 5G development as it will look to acquire or license the chipmaker's modem technology and intellectual property (IP).
With Intel out of the 5G smartphone business, Huawei, Qualcomm, and Samsung are the only major supplier of 5G modems left in the game.
At Mobile World Congress last month, MediaTek showcased its Helio M70 5G modem and plans to announce its availability in the first half of 2019 with an integrated chipset (SoC) coming later at the end of the year.