Apple bites into Intel's smartphone modem business for $1 billion

Yolanda Curtis
July 27, 2019

Before the acquisition, Apple and Intel had always been in talks about the development of 5G devices for iPhones.

With a weakening PC market, Intel has focused increasingly on the more lucrative market for chips that power data centers and the cloud. The acquisition is subject to regulatory approval, although the deal is expected to close during the fourth quarter of 2019.

Apple will also acquire intellectual property, equipment and leases, when acquired Apple will own over 17,000 patents related to wireless technology.

Apple also reportedly poached Umashankar Thyagarajan, the head of Intel's now-defunct modem biz, back in February.

Apple, with a view of producing its own modem chip, has chose to acquire Intel's major share. It will allow them to eventually move completely away from Qualcomm and design their own modems. Apple has also sought to reduce its dependence on third-party vendors and partners by building its own chips and other components. Apple paid an undisclosed amount of money to Qualcomm, rumored to be $4.5 billion, in exchange for a six-year licensing pact (with an option for two additional years) and a multi-year chip supply agreement.

As interesting as the deal is, we are not to expect an iPhone made modern in any iPhone any sooner.

Apple buys the vast majority of Intel's business unit that makes modems. Furthermore, the comprehensive wireless IP portfolio will make Apple's position stronger in any potential patent dispute, should one emerge.

"I think Intel realizes that they have more to gain by Apple getting rid of Qualcomm modems in iPhones than by trying to build something to beat them on the open market", he said. The company possesses the technology and the patents to develop the best chips as evidenced by the premium price it is able to command for its brand products. For Intel, the smartphone modem business has been a drain on its resources at worst and a distraction at best.

And in April this year it was reported that Apple was losing confidence in Intel's ability to hit its deadline for the 5G modems.

Intel earlier this year announced it was abandoning efforts to compete with modem chips for smartphones synched to new-generation "5G" networks. It seems with internet-connected smart devices getting ever more powerful and complex, Intel is the real victor.

"Second quarter results exceeded our expectations on both revenue and earnings, as the growth of data and compute-intensive applications are driving customer demand for higher performance products in both our PC-centric and data-centric businesses", said Intel CEO Bob Swan.

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