Apple said Thursday that it will spend $ 1 billion on buying most of Intel's smart phone modem business – the crucial pieces that connect devices to cellular networks and Wi-Fi. The deal gives the iPhone manufacturer new power to customize and control the technology of their mobile devices at a time when industry is moving to new and faster 5G mobile connections.
Apple did not state how it would pay $ 1 billion. The amount is less than 0.5 percent of the cash balance, which it said in April accounted for more than $ 225 billion. In a statement, Johny Srouji, Apple's senior vice president of hardware technologies, said that the purchase would "accelerate our development on future products and allow Apple to further distinguish ahead."
The deal also helps a headache for chip maker Intel. The modem business had become a lame duck after the company said in April that it left work on 5G technology for smartphones.
Apple's purchase fits with a strategy that has kept the iPhone in the lead of the smartphone crowd for more than a decade.
The company has spent a great deal on designing custom components and manufacturing processes for its devices. It helped Apple's iPhone to be the first in the market with new features like face-locking and advanced augmented reality.
The modems in Apple devices have been an exception to the company's regular close integration. Competitors like Samsung and Huawei build their phones around chips that pack the main processor and modem circuits. It provides cost and space savings. In Apple's devices, the custom processor and externally purchased modems have been separate components.
Kevin Krewell, chief analyst at Tirias Research, says buying Intel's modem device allows Apple to create integrated processors and modems separately. As with Apple's other chip apps, it should provide cost savings and opportunities to create unique new features. "Apple has long wanted to completely control its platform," he says.
Apple said Thursday that the deal will bring 2,200 employees and a significant collection of patents that will swell the total wireless technology collection to more than 1[ads1]7,000.
WIRED Guide to 5G
Despite this expertise, Apple will need years to make its first internal modems, Krewell says. The first 5G iPhone will probably be powered by a modem from Apple's existing provider, Qualcomm, the market leader in mobile processors and modems. Patrick Moorhead, founder of Moor Insights & Strategy, estimates it will take Apple three to five years to challenge Qualcomm's modems.
For some time, Apple tried to gain more control over modems by playing Qualcomm against Intel. Apple began using Intel modems on some iPhones in 2016.
That strategy was founded this year. Apple had fought a complex legal battle with Qualcomm for a license fee, but it suddenly said in April that it would pay an unknown sum to Qualcomm and sign a six-year license agreement. On the same day, Intel announced that it would not make smartphone modems capable of 5G connections.
For Intel, the Apple Agreement represents the latest in a number of unsuccessful attempts to adapt to mobile time. The arrival of smartphones emptied the PC market that ran the company's business. Intel launched a division to market mobile processors, but shut it down after poor sales. Modems gave Intel a new shot in the mobile device market. But Qualcomm's management turned out to be prohibitive, as both Apple and Intel seem to have realized.
"The company gave no further meaning to Intel to invest in," says Krewell. Intel will still develop modems for use outside of smartphones, such as PCs and cars, even though the exact terms of the scheme have not yet been revealed.