Apple Acquiring 'Majority' Of Smartphone Modem Business From Intel For $1B

The acquisition could allow Apple to better control its own destiny in iPhone development going forward, partners told CRN.

Apple has reached an agreement to acquire the "majority" of the smartphone modem business from Intel, in a $1 billion deal that has major implications for future iPhone development.

The two companies announced the deal Thursday, issuing identical news releases. The release said Apple will take on 2,200 Intel employees as well as intellectual property and equipment from the chip maker.

[Related: 5 Signs Apple Wants To Make More Of Its Own Chips]

Talks between Apple and Intel had reportedly been taking place on and off over the past year.

In April, Apple and Qualcomm dropped their long-running legal dispute by reaching a six-year patent license agreement, as well as a multiyear chipset supply agreement.

However, evidence has also been mounting that Apple wants to develop its own iPhone modems—and the acquisition from Intel would appear to accelerate those efforts, according to a solution provider partner of Apple, who asked to not be identified. Apple has a lengthy history of chip design, including on the CPUs used in iPhones and iPads.

"The deal is a great boost to the Apple hardware roadmap and ensures future 5G functionality without Qualcomm hassles," the solution provider executive told CRN in an email. "Just like Apple has done with its other in-house chip designs and acquisitions, I'm wondering if they could also take benefit from the Intel unit to further streamline their modem and other communications needs for their devices. Although, Apple may need to trim down the Intel operations, as they were already losing money even with Apple as a customer."

The acquisition is expected to close during the fourth quarter of the year. The deal will allow Intel to focus on development of 5G network technology "while retaining critical intellectual property and modem technology that our team has created," said Intel CEO Bob Swan in the news release.

Meanwhile, at Apple, the addition of new engineers "together with our significant acquisition of innovative IP, will help expedite our development on future products and allow Apple to further differentiate moving forward," said Johny Srouji, senior vice president of hardware technologies at Apple, in the news release.

Glenn Gruber, senior digital strategist at Blue Bell, Pa.-based Anexinet, No. 218 on the CRN Solution Provider 500, told CRN that "it makes a lot of sense for Apple to acquire Intel’s smartphone modem business."

"I believe that Apple would be very happy to get out from under Qualcomm and either work with more capable partners, or develop this technology in house," Gruber said in an email to CRN. "The challenge for Apple is that the Intel 4G chip performance lags behind Qualcomm significantly and may be a while before a realistic transition from Qualcomm to an internally developed solution is viable."

In April, Intel stated its intentions to pull out of the 5G modem business following the Apple-Qualcomm deal.

According to reports, Intel had been the only 5G modem supplier for the 2020 iPhones but had missed deadlines for delivering sample parts of its 5G modem.

Previously, while Apple and Qualcomm were locked in their legal dispute, Apple began exclusively using Intel's cellular modems starting with the 2018 iPhone lineup.

A December report in The Information pointed to a modem project within Apple, which was followed by a February report from Reuters, which indicated Apple had shifted modem engineering from its supply chain unit into its own hardware division.