Uh Oh, iPhones May Not Have 5G in 2020 Either

5G cellular networks are being billed as transformative technology, and they’re coming to major U.S. cities this year. While smartphone manufacturers like Samsung and Huawei are releasing 5G-capable smartphones in 2019, Apple (NASDAQ:AAPL) is not. Its modem partner Intel (NASDAQ:INTC) won’t be ready. That’s not news at this point and with 5G not expected outside of big centers this year, not a disaster. However, a new report suggests Intel is struggling, Apple is throwing engineers at its own in-house modem design and there may be no 5G iPhone in 2020 either…

Source: Intel

That would be a much bigger problem. With 5G expected to go mainstream in 2020, having no 5G iPhone available would put Apple seriously behind the smartphone competition. That would hit sales, and when iPhone revenue is threatened, Apple stock pays the price.

Report: 5G iPhone in 2020 Questionable

It’s a given at this point that Apple won’t have 5G support in this year’s iPhones. Its modem supplier, Intel, announced last year that its 5G offering will be rolling out at the end of 2019 –and that’s too late to make it into this year’s crop of iPhones. 

However, a new report in Fast Company should chill APPL investors. According to the report, Apple has lost confidence that Intel will be able to deliver its 5G modem in time for the 2020 iPhone. Fast Company’s sources say Intel has been repeatedly missing deadlines and chewing through project managers. Further, with the cut-throat price AAPL negotiated, Intel isn’t exactly incentivized to throw resources at a project that means giving up higher margin business.

Apple is said to be working on its own modem chip design, with between 1,000 and 1,200 engineers now on the project. That effort isn’t expected to pay off until 2021. By the way, this pattern of squeezing suppliers on price, then developing its own components in-house is a tactic Apple has been employing with the iPhone for years

Between Intel’s stumbles and Apple’s inability to develop its own modem chip quickly enough, there is a very real possibility of no 5G iPhone in 2020. 

Samsung announced the Galaxy S10 5G back in February, and other smartphone makers including Huawei, LG and Xiaomi have already announced 5G models for 2019. With 5G coverage so limited in 2019, having no iPhone with 5G support this fall wasn’t a cause for panic. However, if Apple lacks a 5G iPhone in 2020 as well, sales will suffer, AAPL’s primary source of revenue will be at risk of further decreases and Apple stock is going to take a hit.

What About Qualcomm?

If Intel isn’t capable of meeting AAPL’s timelines and Apple’s own attempt at a 5G modem wont be ready in time, what about Qualcomm (NASDAQ:QCOM)? After all, Qualcomm is the company that will be supplying the 5G modem most competing smartphones will be using, and up until Intel won Apple’s business, Qualcomm was inside the iPhone as well.

Don’t count on that happening…

The two companies are still actively slugging it out in court, fighting over royalties and accusations that Apple and Intel conspired to steal modem tech from Qualcomm. It is highly unlikely they will resolve their differences and return to a business as usual relationship in time for the release of next year’s iPhones. 

Fast Company points out several other companies do make 5G modems — including Samsung and Taiwan’s Mediatek — but they would not be in position to supply Apple in time.

At this point, the ability of Apple to release a 5G iPhone next year seems up in the air. Apple’s own efforts seem unlikely to pay off in time for the 2020 iPhones. If Intel can turn things around, get sample modems to AAPL this summer and finished modems in production early next year then they might meet the deadline. But that’s far from guaranteed.

Otherwise, Apple stock could be in for a rough ride next fall. With 5G becoming more widespread across the U.S. and all the major flagship smartphones offering 5G support, a 2020 iPhone lineup that lacked the feature would be at a serious disadvantage.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2019/04/uh-oh-apples-iphone-may-not-have-5g-in-2020-either/.

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