Apple spends $1 billion to buy most of Intel's smartphone modem chip business

Apple spends $1 billion to buy most of Intel's smartphone modem chip business
Apple announced this afternoon that it has agreed to purchase the majority of Intel's smartphone modem chip business in a transaction that is being valued at $1 billion. Besides the patents, equipment, and leases that will move from the chipmaker to Apple, 2,200 Intel employees will now work for the iPhone manufacturer. The deal is expected to close in the fourth quarter and goes a long way toward helping Apple design and manufacture its own modem chips. Intel will still have the right to produce modem chips for PCs, IoT and self-driving cars.

The 2018 iPhones all exclusively use Intel's 4G LTE modem chips and Intel was originally slated to deliver a 5G modem chip to Apple in time for use with the 2020 iPhones. But a settlement between Apple and Qualcomm announced last April allowed both companies to bury the hatchet and end a feud that had kept Apple from sourcing Qualcomm's 5G modem chips. 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. So starting next year we should see a Qualcomm 5G modem chip inside the iPhone models that support the next generation of wireless connectivity. Based on the early rumors, that would be the 5.4-inch iPhone 12 and 6.7-inch iPhone 12 Max.

This purchase should make Apple executives breathe a sigh of relief

Even though Intel said that it would ship its 5G modem chip in time for use inside the 2020 iPhones, it appeared that Apple didn't fully trust Intel's design. In February, there was talk about Apple designing its own 5G modem chip and it shifted around personnel in an effort to get the ball rolling on this project. All that Apple seemingly needed was a reliable supplier to get it from 2020 to 2022 or 2023 when the first Apple-designed 5G modem chip could start rolling off the assembly lines. That might have been the impetus behind Apple's settlement with Qualcomm.

But with the purchase of the majority of Intel's smartphone modem chip business, Apple will soon be able to control its own destiny in terms of obtaining this key component. The 2019 iPhones will continue to use Intel's 4G LTE modem chips; these units will ship before Apple and Intel close on the transaction.

The bottom line is that even with this purchase, there is still a good chance that Apple relies on Qualcomm to supply it with 5G modem chips for the next few years. But this deal has to make the brass in Cupertino feel relieved. Things were looking desperate at times for Apple. Back in January, during the FTC v. Qualcomm trial, Apple supply chain executive Tony Blevins admitted that the company had talks with Samsung and MediaTek about working out a supply agreement for 5G modem chips.

The $1 billion price paid by Apple makes this deal one of the most expensive purchases in Apple's history. The most amount of money that Apple has paid to buy a company is the $3 billion it shelled out for Beats Audio back in 2014.



1. sgodsell

Posts: 7514; Member since: Mar 16, 2013

Apple got ripped off then. I bet you Intel would have taken a quarter of that billion. It's not like anyone was lining up to buy their modem business. Also no matter what Apple will still have to pay all the patents fees for LTE, 3G, 5g, antennas, and more. But I guess Apple will be happy to pay reduced fees. Plus Qualcomm has started to embed their modems into their processors these days. Which ultimately will make Qualcomm wireless network speeds faster.

2. sgodsell

Posts: 7514; Member since: Mar 16, 2013

Who knows maybe Apple will start to embed their new modems in their SoCs in the future as well, like Qualcomm.

3. Dr.Phil

Posts: 2474; Member since: Feb 14, 2011

Actually in the sheer amounts of patents Intel has like 3,500 while Qualcomm has 4,500 patents related to 5G technology. They both pale in comparison to Huawei that has like 11,000 patents for 5G. Qualcomm used to hold the overwhelming advantage under 4G LTE when they had the most patents out of anyone. That combined with their monopoly over CDMA technology is what basically led everyone to go to Qualcomm to get their modems. 5G is a different landscape altogether and I think you are going to see more competition in the coming years.

11. sgodsell

Posts: 7514; Member since: Mar 16, 2013

With companies like Qualcomm and Samsung starting to embed modems on their latest SoCs. Qualcomm will have two variants of the SD 865. One with 5G modem built in, and the other without a modem. Samsung's latest Exynos will have an LTE modem built in as well. So Apple could do the same thing to their Ax SoCs. Ultimately this has the advantage of being more power efficient, and faster as well. Who knows if and when that will happen for Apple. But if both Qualcomm and Samsung are embedding modems, then most likely Apple is going to do the same thing at a future date.

12. sgodsell

Posts: 7514; Member since: Mar 16, 2013

Leo_MC all the stuff I post has facts. You just have to be smart. But that must be hard for you Leo_MC.

4. iloveapps

Posts: 909; Member since: Mar 21, 2019

Your just a butthurt android fan techie who didn’t like what apple is doing for its business. I like apple making its own chip. Its just like software and hardware integration of apple, the best of everything.

5. Vancetastic

Posts: 1699; Member since: May 17, 2017

Oldskool is Techie, FYI.

7. lyndon420

Posts: 6861; Member since: Jul 11, 2012

He's not that bright...we all know that lol. Only the 'foolz' agree with him. ;) (see post 6 for an example)

20. sissy246

Posts: 7129; Member since: Mar 04, 2015

Oldskool yes That is ok iloveapps, we know you are peaceboy.

26. whatev

Posts: 2396; Member since: Oct 28, 2015

Sgodsell honey, why are you so obsessed with apple? Can we talk about it?

9. Tsepz_GP

Posts: 1176; Member since: Apr 12, 2012

More vertical integration, this is fantastic!

13. mootu

Posts: 1537; Member since: Mar 16, 2017

Apple may have just given itself a huge headache due to the fact they signed a 6 year deal with QC. If they release their own modem before that deal is up they will be liable for costs for the rest of that contract which will be massively expensive. Expect to see Apple and Qualcomm back in court again in a few years time.

15. Demo-jay

Posts: 86; Member since: Feb 13, 2018

I think they’ll still use both modems...the apple made modems are said to be for tablets for now

* Some comments have been hidden, because they don't meet the discussions rules.

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