Apple has paid $1 Bn to acquire Intel’s smartphone modem chips business, which was one weak area in the electronic giant’s plans to release next-gen iPhones ready for 5G networks. As part of the acquisition, 2,200 Intel employees will be joining Apple by the end of the year and Intel will also sign over close to 17K patents to the Cupertino company.
The patents include protocols for cellular standards, modem architecture and modem operation technology, which would hold Apple in good stead for its own chip production business. It’s to be noted that Apple already architects, designs and manufacturers its own smartphone chipset, which are some of the most high-performance semiconductors in the smartphone market. However, the company has struggled when it comes to smartphone modems that form the basis of all mobile communications – wheher it’s cellular calls, SMSes or mobile data.
Through the acquisition, Apple is only taking over the smartphone modem business, while Intel will continue to work on modems for non-smartphone applications such as IoT, laptops, desktop PCs, servers and other embedded platforms. Crucially, Apple has been battling chipmaker Qualcomm in a long-protracted battle over the use of its smartphone modems, but the Intel modem business acquisition clears the path for Apple to release 5G iPhones in the upcoming year. While other smartphone vendors such as Samsung, Xiaomi and Huawei have already released 5G smartphones, Apple would only be able to launch a 5G iPhone for next-gen mobile connectivity in 2020. Apple signed a licensing agreement with Qualcomm for iPhones powered by the latter’s modems until 2025, but the deal with Intel means Apple can cut ties with Qualcomm in the long run and reduce the per-device licensing fee, which hurts the company’s high-margin strategy for smartphones.
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“We have long respected Apple and we’re confident they provide the right environment for this talented team and these important assets moving forward. We’re looking forward to putting our full effort into 5G where it most closely aligns with the needs of our global customer base, including network operators, telecommunications equipment manufacturers and cloud service providers,” Intel CEO Bob Swan said about the high-profile acquisition. announcing the news.
While Apple has acquired smaller startups, this represents its biggest acquisition since it bought audio company Beats in 2014 for $3 Bn. But the dire need to fix a 5G modem supplier in time for the launch of the next-gen cellular network, which is expected to hit most developed countries by early next year. It is to be noted that Intel was a supplied supplier of modems for iPhones, but this deal finally cements a modem chip supplier for Apple, which has been a thorn in its side for many years.
“Apple is excited to have so many excellent engineers join our growing cellular technologies group, and know they’ll thrive in Apple’s creative and dynamic environment. They, together with our significant acquisition of innovative IP, will help expedite our development on future products and allow Apple to further differentiate moving forward,” Johny Srouji, Apple’s senior VP of hardware said.