Apple's new iPhones to miss out on higher-speed data links

Published Jun 9, 2017

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San Francisco - Verizon, AT&T and the rest of the US wireless industry

have a big boast for this year’s crop of smartphones, thanks to network

upgrades, devices will be able to download as much as a gigabit of data in a

single second speeds 100 times faster than before.

But that won’t be the case for Apple’s newest iPhones,

devices to go on sale later this year, leaving the company’s most important

product potentially lagging behind the data performance of rival smartphones.

The reason stems from the delicate and sometimes complicated

way Apple manages the supply of the components embedded in its flagship device in

this case, the modems, which handle the connection between a phone and the

cellular network.

One of Apple’s suppliers, Qualcomm, sells a modem

capable of the 1 gigabit download speeds. Another supplier, Intel, is working

on a modem with the same capability, but it won’t be ready for the iPhone’s

introduction, according to people familiar with Apple’s decision.

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Apple could in theory just use Qualcomm’s chips, but it has

an aversion to being dependent on a single supplier, and its relationship with

San Diego-based Qualcomm is particularly thorny. Cupertino, California-based

Apple is embroiled in a bitter legal fight with the chipmaker, accusing the

supplier of maintaining an illegal monopoly, and it’s seeking to loosen

Qualcomm’s grip on the market for high-end smartphone modems.

That’s why Apple will stick with Qualcomm modems for some of

its new iPhones while relying on Intel for others. Until Intel is able to offer

its chips with matching features, Apple won’t enable some of capabilities of

the phones running with Qualcomm modems, said the people, who asked not to be

identified because the plan isn’t public. Apple, Qualcomm and Intel declined to

comment.

Apple’s decision clashes with the marketing plans of a

cellular industry desperate to show off faster network speeds to grab market

share. The top US wireless carriers, Verizon AT&T, T-Mobile US and Sprint

have declared 2017 the year of 1 gigabit speeds.

Apple used two modem suppliers and the same technique to mask

performance disparities for last year’s iPhone 7. But the rise of gigabit

wireless networks could make the strategy more risky: iPhone users will have a

unified experience, no matter what modem is inside the new device, but it could

look even less speedy compared to newer gigabit-ready smartphones from other

manufacturers.

The carriers will be able to boast about 1 gigabit speeds if

customers use other phones. Samsung Electronic’s Galaxy S8, the main rival to

the next iPhones, has Qualcomm’s X16 LTE modem and will keep up with the top

speeds of the major wireless networks. Sprint sells the gigabit-ready HTC U11

and will have a Motorola Gigabit LTE phone later this year.

Apple’s decision to introduce new technology when it wants,

rather than chase whatever the market dictates, isn’t new. The original

iPhone launched in 2007 without support for 3G networks, and it was still

wildly successful. It wasn’t until 2012 that the iPhone supported LTE

technology that’s the basis of 4G networks a year after Samsung Electronics added that capability to its smartphones.

Still, Apple is dealing with a market that’s crying out for

innovation to revive growth. Last year, the company’s revenue from iPhones,

which generates more than 60 percent of Apple’s $216 billion annual sales, fell

for the first time. Smartphone total market growth was just 2.5 percent,

breaking a run of double-digit annual surges, according to industry analyst

IDC.

Whether Apple’s decision will overshadow the company’s slick

new design and features in the phone coming later this year, as well as its

customer loyalty, remains to be seen. Achieving 1 gigabit data speeds requires

almost lab-like optimal signal conditions that seldom occur in the real world.

Nonetheless, the first carrier to claim such network

capabilities will get bragging rights and an edge at selling the promise of

instantaneous movie downloads and high-quality live video. It’s one area where

service providers can’t afford to be seen as laggards.

Luring Customers

The carriers are already in a fierce price battle for

subscribers. As the pool of new customers has declined, most of the user gains

are coming at the expense of rivals. Sprint and T-Mobile have been taking

customers from AT&T and Verizon by offering cheaper unlimited data at a

time when video hungry users seek lower-cost plans to support their habits.

The ability to advertise a service that’s 100-times faster

may help carriers shifts consumer focus to network performance and away from

cut-throat pricing.

T-Mobile promised to have the first 1 gigabit data service

available in the US this year and has already started making network upgrades,

Chief Technology Officer Neville Ray said in February. AT&T has started 1

gigabit mobile service in Austin, Texas, and plans to expand to as many as 20

cities this year. Verizon will begin 5G trials in 11 markets this summer and

plans to start mobile testing of 1 gigabit speeds in those cities.

Sprint has been one of the most aggressive proponents of 1

gigabit mobile speeds, promising in December that it would offer the fastest

service in the industry. Sprint said it will have at least three 1 gigabit

capable phones available this year with the exception of iPhones.

BLOOMBERG 

 

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