UPDATED 20:41 EDT / JULY 22 2019

INFRA

Apple reportedly in advanced talks to buy Intel’s 5G modem business

Apple Inc. is on the cusp of agreeing a deal to acquire Intel Corp.’s failed smartphone modem business for about $1 billion, according to a report in the Wall Street Journal late Monday.

Under the deal, which could be announced as early as next week, Apple would gain both patents and employees from the Intel business as it looks to accelerate the development of its own 5G chips.

The Journal’s report would seem to confirm a story that appeared last month in The Information. It said Apple was specifically interested in Intel’s German smartphone modem business, which was established after the chipmaker bought a company called Infineon Technologies AG for $1.4 billion back in 2011.

Rumors of Apple’s interest in the business emerged in April, around the same time that the iPhone maker announced it had settled a legal dispute with Qualcomm Technologies Inc. over its patent licensing business. Apple said then it would resume using Qualcomm’s components in its smartphones at the expense of Intel, which was promptly dropped as a supplier.

Apple’s reasoning was that it simply couldn’t afford to wait for Intel to come up with a working 5G modem. At the time, it was said that Intel was still two to three years away from completing a 5G-capable modem chip, and that Apple had been unimpressed with the company’s early designs.

Still, even with Qualcomm’s help, Apple isn’t expected to launch its first 5G iPhone until 2020 at the earliest. That’s a bit of a problem for Apple, since most of its rivals, including Samsung Electronics Co. Ltd. and Huawei Technologies Co. Ltd., have already announced 5G smartphones.

Apple’s decision to drop Intel was the main factor in the chipmaker’s decision to announce it was exiting the 5G mobile modem business. Intel Chief Executive Officer Bob Swan said that after being dropped by Apple, it just “didn’t see a path forward” because the iPhone maker was always going to be its main customer.

Apple has a history of chopping and changing its suppliers. The company’s original iPhones used Infineon’s modems, and it began using Qualcomm’s chips only in 2011. Then came the legal dispute with Qualcomm, which prompted Apple to switch to Intel in 2016, and now back to Qualcomm again.

In any case, it seems the acquisition of Intel’s modem business would settle the issue once and for all. Apple has reportedly been working on developing its own, in-house modems, similar to its existing internal processor platform that has resulted in the iPhone and iPad’s proprietary A-series chipsets. The theory is that Apple wants to be able to operate independently of other suppliers, so acquiring Intel’s patents and engineering staff would go some way toward making that happen.

“Apple believes it can lower costs and have more control by creating its own modem,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “What Apple also needs to consider is that it only gets that control if it also has radio frequency intellectual property. If Apple does buy these assets, it could shave off a few years, but I still think it takes best case five years to get competitive.”

That may be so, but the real reason for Apple’s interest in Intel’s modem business is harder to pin down, Charles King, an analyst with Pund-IT Inc., told SiliconANGLE. He noted that Apple has long been a company that wants to be beholden to no one. That has been the case ever since co-founder and ex-CEO Steve Jobs’ returned, when he killed off a sizable partner community of Mac clone makers, he said.

“Conventional wisdom suggests that Apple wants Intel’s business and assets to get a head start on making its own 5G modems,” King said. “That may well happen, but keep in mind that many folks think Intel’s modem tech is kinda crappy. Another option is that, much like Google’s purchase of Motorola Mobility, Apple is buying a patent war chest that can provide it cover in future litigation. Either or both of these assumptions may be correct.”

Analyst Holger Mueller of Constellation Research Inc. said if Apple was buying Intel’s modem business primarily for its patents, the big question is how sanitized the IP portfolio is, especially in light of the Qualcomm litigation outcome. As for building its own components, he said that makes sense, though Apple still needs to prove that it can do so successfully.

“It is one thing to create internally consumed components but another thing to succeed against the competition,” Mueller said.

Photo: Andrew/Flickr

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