Apple just announced that it has acquired most of Intel's smartphone modem business for $1 billion. As part of the deal, 2,200 Intel employees will become Apple employees, and Apple will gain some patents, equipment, and intellectual property as well. The acquisition, which is subject to regulatory approval, is expected to close in the fourth quarter of 2019.
It's a very Apple-like move. The company prefers to control its own fate whenever possible, integrating its own hardware and software to create an optimum user experience, while most other mobile device makers have to make their hardware work with someone else's operating system, most commonly Google's Android.
The announcement comes just a few months after Apple settled a multi-year, multi-nation legal battle with Qualcomm, Intel's main competitor, which has been supplying modems for Apple devices. Apple had accused Qualcomm of charging excessive fees for patent royalties, and refusing to sell chips to companies that declined to license the patents. While the legal battle was going on, Apple used Intel modems to create the iPhone XS. When the dispute was settled, Apple and Qualcomm signed a six-year licensing agreement, and when they did Intel announced that, as a result, it would be quitting the 5G business.
Breaking free of Qualcomm.
Although Apple will likely use Qualcomm modems for its first generation of 5G phones, expected to hit the market late next year, bringing smartphone modem manufacture in-house will offer big benefits when it builds future 5G iPhones. Apple has traditionally used customized components and its control of manufacture to bring innovations to market, such as advanced augmented reality. But the fact that it didn't build its own modems was a drawback when it came to design. As Wired explains, while some manufacturers use chips that combine the modem and main processor, in Apple products, the processor and modem have been separate components. That adds both bulk and expense to existing Apple phones.
Buying Intel's smartphone modem business means Apple can combine both functions into one chip and perhaps create new custom functionality as well. It will give it the more complete control over its mobile products the company has been craving. It will save it from having to pay royalties to Qualcomm once the two companies' six-year contract is concluded. All in all, it looks like a very smart move.