Intel sold its smartphone modem business to Apple, but it says it will still be a big player in 5G

Key Points
  • Intel CEO Bob Swan told CNBC his company will be a big player in future 5G networks.
  • The comments come after Intel sold most of its smartphone modem business to Apple for $1 billion
  • Explaining the rationale, Swan said 5G modems were not an area that would differentiate growth for the industry and with only one customer — Apple — retaining the business would not provide attractive returns.
Intel CEO: Why we sold the smartphone modem business to Apple

Intel sold its smartphone modem business to Apple, but the chipmaker's CEO said Wednesday that his company will still be a big player in the 5G space.

5G refers to next generation of mobile networking that promises super-fast data speeds with the ability to support new technologies like driverless cars. Apple bought the majority of Intel's modem business for $1 billion, including technology related to the development of the 5G modems required for devices to connect to the new networks.

Intel still has the option to develop 5G chips for non-smartphone products.

Apple made the move in order to develop its own in-house 5G modems rather than rely on Qualcomm, a company with which the iPhone maker has had a fraught history.

But the move is also a positive for Intel, according to CEO Bob Swan, who said the company can now focus on 5G in other areas.

Speaking with CNBC, Swan explained the rationale behind selling off the modem business: 5G modems, he said, were not an area that would differentiate growth for the industry. And with only one customer — Apple — retaining the business would not provide attractive returns, he added.

"So we doubled down on 5G networks where we think there's real opportunities and last week we announced the sale of the 5G smartphone modem to Apple. But we also retained access to the technologies in the event that we need a 5G modem for non-smartphone applications, like a PC or an automobile," Swan said.

Meanwhile, he explained that mobile networks will also be a big area for Intel going forward. The U.S. chip giant traditionally hasn't focused on the telecommunications sector, but is starting to shift its attention to what the CEO calls the "cloudification of the network." That refers to the increasing amount of software being used in mobile networks that runs in the cloud.

Traditional mobile networks rely on huge amounts of expensive hardware, but an increased use of cloud-based software could reduce the need for some of the physical gear, making networks cheaper to build and faster to upgrade.

Last month, Intel announced a partnership with Rakuten, a Japanese tech conglomerate, to create what it calls "the world's first end-to-end cloud-native mobile network."

That's an area Swan said he sees as a big growth area for Intel due to the world's "insatiable demand for data."

What is 5G?

Intel, he said, believes that the future will see more and more processing moving "from the cloud or from the data centers into the networks."

"That is what we have been investing in and we see that as significant opportunities," Swan told CNBC.

Intel has been looking to diversify its business beyond just processors for PCs to new always-connected areas such as driverless cars and so-called internet of things devices. The push into the world of telecommunications is part of that.

Swan said that, while the revenue split between what he calls PC-centric and data-centric products is around 50-50, that will change in the future to favor the company's data-centric chips.

"The technologies and the architectures that we're building for this data center of the world will become a bigger and bigger part of the company," Swan said.