Apple reportedly is close to buying Intel's modem chip business

Apple reportedly is close to buying Intel's modem chip business
By April of this year, Apple was desperate. It was embroiled in a fight with Qualcomm that was playing out in numerous lawsuits including one that was taking place in San Diego with billions of dollars at stake. With Qualcomm apparently unwilling to sell it 5G modem chips, Apple was relying on Intel, the company that supplied it with the 4G LTE modem chips used on the 2018 iPhones. But there were questions about whether Intel could deliver a 5G modem chip in time for Apple to release a 5G iPhone by 2020.

On April 7th, Intel said that it would be able to supply Apple with its 5G modem chip in time for the first 5G iPhone to be launched next year. But just nine days later, while closing arguments were taking place during the trial in San Diego, a blockbuster announcement was made; Apple agreed to pay Qualcomm an undisclosed amount (believed to be $4.5 billion) and in return Qualcomm gave Apple a six-year license (with an option for two additional years) and a multi-year chip supply agreement. All lawsuits were dropped. Intel could see which way the wind was blowing and later that same day, the chipmaker announced that it was quitting the 5G smartphone modem business. And last month, the rumors started about Apple buying Intel's smartphone modem business. Such an acquisition, if completed, would help Apple achieve its goal of producing its own modem chips.

Apple seeks to bring in-house as much of its supply chain as possible

Today, the Wall Street Journal reports that the talks between Apple and Intel have heated up to the point where they are now classified as "advanced." The deal, said to be valued at $1 billion or more, could be announced as soon as next week. This would be a big transaction for Apple as the company usually makes small purchases. For example, in 2012 Apple bought biometrics firm AuthenTec for $356 million and Touch ID debuted a year later on the iPhone 5s. In 2015, Apple paid a reported $20 million for imaging firm LinX. The acquisition helped Apple immediately step up its camera game.  The most money that Apple has ever shelled out to buy another company was the $3 billion it spent to buy Beats Audio in 2014. While most of these deals had almost immediate payoffs for Apple, even with Intel's smartphone modem chip business, it might not be until 2022 or 2023 before Apple is able to be self-sufficient in this area.

Apple has been hiring engineers, including some from Intel, and plans on opening an office in San Diego with 1,200 employees. If a deal is reached, Intel will be getting rid of a business that has been losing $1 billion a year. And while it will no longer be producing chips for smartphones, it will still work on 5G based components for other devices. Meanwhile, Apple is looking to move in-house as much of the iPhone's supply chain as possible. Last year it spent $600 million to purchase facilities and engineers from Dialog Semiconductors so that it could start producing internally the battery-management chips that it had been buying from Dialog in the past.

While Apple appears to have this deal locked up, when Intel first announced that it was exiting the business, it received indications of interest from other companies. Should Apple and Intel fail to come to an agreement, another buyer could step in to take Apple's place. Meanwhile, investors rightly regard this as potentially bad news for Qualcomm. When the story broke after the 4 pm EDT close of the NYSE, Qualcomm's shares dropped 1.8% to $74.55.

If Apple ends up buying Intel's smartphone modem chip business, it can easily afford it. After accounting for debt, Apple had $113 billion of cash available as of March 30th when its fiscal second-quarter came to an end.



1. lyndon420

Posts: 6861; Member since: Jul 11, 2012

I think most of us saw this coming...just needed to devalue Intel enough to make it a cheap buy. Kinda like what ms did to Nokia.

7. sgodsell

Posts: 7514; Member since: Mar 16, 2013

So true. What I think is kind of funny is how Apple only has $113 billion left in he bank, and that is after Apple buying back more of their stock, again! To the tune of $75 billion, to stabilize their stock, and make the shareholders happy.

8. lyndon420

Posts: 6861; Member since: Jul 11, 2012

It's all 'business' now. Apple doesn't have a visionary 'iDol' anymore. And like I (under the current direction of Cook), the rainbow colored 'iconic' Apple logo will be making a 'comeback' (not the spelling I wanted, but we know how these things work now...L/L lol).

9. oldskool50 unregistered

No this is nothing like the Microsoft and Nonia desl. Who else did Intel make modems for? No one! This was a joint venture between Apple and Intel. APPLE went to Intel because Intel was working on a modem. Apple was rye only OEM who bought the modem and we knew before they even got it, there were issues because Intel said they problems producing it. Apple knew it had issues but the problem is they had to use it because they already designed the PCB for it and it was likely to late to change it and they didn't want to go back to Qualcomm. Then Intel is also having issues developing the 5G variant Then also when it showed in the court case that this whole point was Apple deceiving the courts, and Apple had zero option for a 5G modem, they had to swallow their ignorance and goncrawlijg back to Qualcomm. Just like they went crawling back to Samsung. Qualcomm should have showed them the middle finger and just let Apple suffer and lose sales. I wouldn't have sold them anything. Since Apple left the joint venture, there was simply no point for in Intel to continue. In fact PA posted an article where intel stated they made zero profit from the deal they made with Apple. And the reason they didnt make any money is because they failed to have what Apple needed. Apple bought their crappy none working modem and put it in their phones and intel wasnt gonna be ontime with the 5G modem as expected. Apple.had zero choice but to cave. And intel said they weren't gonna make anymore modems after the Apple.xeal failed.

21. shm224

Posts: 295; Member since: Mar 19, 2015

It wasn't a joint venture. Nobody else wanted to buy crappy Intel modems.

20. shm224

Posts: 295; Member since: Mar 19, 2015

I hear this is a typical ploy by a bigger company to buy smaller supplier on the the cheap.

2. vgking9699

Posts: 205; Member since: Mar 01, 2019

Lol this could mean that androids no longer allowed to use intel

3. Be_Mine

Posts: 299; Member since: Dec 29, 2013

Which Android OEM use Intel Modem?

5. lyndon420

Posts: 6861; Member since: Jul 11, 2012

I was wondering the same?! Maybe apple will take iNtel in a new direction that is supposed to blow our minds??! s/

4. cmdacos

Posts: 4302; Member since: Nov 01, 2016

Are there android oems dumb enough to use horrible Intel modems?

6. lyndon420

Posts: 6861; Member since: Jul 11, 2012

It doesn't matter...they will be exclusively least for now... Give apple at least 5 years, and maybe they'll make something noteworthy of this... s/...??

15. Mikele

Posts: 184; Member since: Nov 19, 2013

And call it a new revolution in modern modem after many years of existence

10. monkeyb

Posts: 413; Member since: Jan 17, 2018

I dont agree with the no immediate pay off argument. iphone X will be sold for another 2 years. iphone XR, XS, XS Plus - will be sold for atleast 2 years. Apple will need to use intel chips in all 3 phones this year until 4 more years. Apple might use intels chip in next years base model. So all the licensing fees that they will save in next 4 years will be a very good return of investment for Apple.

19. Back_from_beyond

Posts: 1459; Member since: Sep 04, 2015

Intel has said to want to keep the 4G modem side of their business, so Apple would have to continue to pay Intel for the 4G modems and licenses.

11. Derekjeter

Posts: 1546; Member since: Oct 27, 2011

I don’t understand this purchase. Intel has horrible modems. Just look at the iPhone X, XS, XR. They have horrible reception.

25. midan

Posts: 3097; Member since: Oct 09, 2017

Never had any problem with reception with my X, over a year i actually thought my phone has qualcomm modem, but i checked it and i have intel version. Working perfectly and speed is very fast.

26. Be_Mine

Posts: 299; Member since: Dec 29, 2013

Hmnnn... If Intel Modem is already good enough for you. Just imagine how much better it will be, if it have a Qualcomm Modem.

27. midan

Posts: 3097; Member since: Oct 09, 2017

I can't see how it could be any better because it's already working perfectly for me. And by the way my old iPhones have qualcomm modem and i haven't noticed any difference.

29. Penny

Posts: 1869; Member since: Feb 04, 2011

For a consumer hardware company as large as Apple, owning parts of the supply chain provides a lot of strategic flexibility and control. Based on the article, it seems like Apple was backed into a corner by Qualcomm, the single modem manufacturer that seemed capable of delivering these chips. If there is no competitor to Qualcomm, then Apple and all other phone manufacturers are at Qualcomm's mercy. So Apple had to swallow the $4.5B bill for now, because there is literally no other option. They want to make sure they have an option in the future, and even better, one they can control.

23. surethom

Posts: 1729; Member since: Mar 04, 2009

Its a good idea to bring in house a few hardware companies while Apple has so much cash, also start increasing the amount of shares will also help in the long term.

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