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Apple Inc purchased the majority of Intel Corp’s modem business in a deal valued at $1 billion. The acquisition means that Apple is now well on the way to producing its own 5G modems for its smartphones.
Around 2,200 Intel employees will join Apple, along with intellectual property, equipment, and leases. The transaction is, as said in Apple’s blog, valued at $1 billion and is expected to close in the fourth quarter of 2019, depending on regulatory approvals and other customary conditions, including works council and other relevant consultations in certain jurisdictions. Apple’s relationship with Intel dates back to 2005, when the two companies began working together on microprocessors for the Mac.
Now, together with what they already have, Apple’s portfolio will now 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. Until now, Apple had to rely mostly on Qualcomm for hardware and it is presumed that the company could present their in-house modems in around three years.
Kevin Krewell, an analyst with the chip-analysis firm Tirias Research LLC said that by designing its own modems, Apple should be more able to integrate them with the iPhone’s other microprocessors, boosting the iPhone’s battery life and saving valuable real estate inside the iPhone.
Even though Intel exited 5G phone business, that doesn’t mean it will be getting out of the modem business entirely. It’ll still be able to develop modems for PCs, Internet of Things devices, autonomous vehicles, and seemingly anything that’s not a smartphone. For Intel, this deal frees it from operations that had been losing about $1 billion annually and has generally failed to live up to expectations.
Intel CEO Bob Swan said the acquisition will allow the company to focus on developing other 5G technologies:
“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. 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.”
Apple’s SVP of hardware technologies, Johny Srouji, added the acquisition will “help expedite our development on future products and allow Apple to further differentiate moving forward.”
Be it as it may, this deal seems to be a big thing in tech industry since Apple generally prefers to acquire about 15 to 20 small companies annually that have technology it can easily integrate. However, since its iPhone Business registered with a slowdown in its iPhone business, the company became more open to bigger deals.
Last year, they agreed to a $600 million deal to acquire 300 engineers and facilities from Dialog Semiconductor PLC. Also, let’s not forget that they managed a deal with Dow Jones & Co., publisher of the WSJ, to supply news through Apple services.
Intel (INTC) stock rose 5.7% to $55.05 after the news and the company’s report that its earnings beat analysts’ expectations but at the time of writing, they went down 1.44% to $52.16. Apple shares also went down 0.79% to $207.02.