Apple is purchasing the majority of Intel’s modem business in a deal valued at $1 billion, the companies said on Thursday.
Under the deal, about 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases. Combined with its existing portfolio, Apple will have 17,000 wireless technology patents, ranging from cellular communication standards to modems, making it a more powerful player in global licensing talks that will likely take place between major 5G patent holders such as Huawei Technologies Co Ltd.
After the deal, Intel will retain the right to develop modems for non-smartphone applications, such as PCs, industrial equipment and self-driving cars.
“This agreement enables us to focus on developing technology for the 5G network while retaining critical intellectual property and modem technology that our team has created,” said Intel CEO Bob Swan. “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.”
“We’ve worked with Intel for many years and know this team shares Apple’s passion for designing technologies that deliver the world’s best experiences for our users,” said Johny Srouji, Apple’s senior vice president of Hardware Technologies. “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.”
Intel was the sole source of iPhone modem chips over the past year after Apple got into a legal fight with previous supplier Qualcomm over Qualcomm patent licensing practices.
Apple reached a surprise settlement in April that called for the iPhone to once again use Qualcomm modem chips. Intel later said it would quit the smartphone modem business.
The deal with Intel will bolster Apple’s goal to make its own modem chip. The company's biggest global rivals - Samsung Electronics and Huawei - already have the ability to self-supply modem chips.
Apple plans to use Qualcomm’s modem technology for a 5G iPhone in 2020 but wants to have an internally developed 5G modem technology ready for use in some of its products by 2021.
With the Intel deal, Apple gains a serious pack of 5G patents. To sell a 5G iPhone, Apple will still need to strike deals with the major holders of 5G patents, including Nokia, Ericsson, Huawei and Qualcomm. But holding Intel's patent portfolio could impact the valuations when it comes to a future cross-licensing deal with other 5G technology players.