Here's Why Apple Just Spent $1 Billion to Buy Intel's Modem Business

Apple uses Intel modems in its current iPhones

Besides the patents, equipment, and leases that will move from the chipmaker to Apple, 2,200 Intel employees will now work for the iPhone manufacturer.

Apple, in contrast, has purchased a ready-made modem specialist team and patents which could, one day, reduce its reliance on Qualcomm as a component supplier for iPhone chips. This deal grants Apple access to Intel's 5G modem technology, as well as its patents and engineering staff. The sale of the business to Apple will allow the company to develop its own modem IP instead of using Intel's or Qualcomm's. In recent months, Apple has been ramping up hiring from Intel and Qualcomm to work on 5G modems.

Developing its own modems has the potential to deliver big benefits for Apple. This is similar to Apple's chip strategy that gives it advantage over most Android smartphone brands who use Qualcomm chips. When Apple used modems from both companies in the iPhone X, one report claimed that Qualcomm's hardware offered higher speeds than Intel's, despite some features on Qualcomm's modem being disabled.

The talks with Intel to acquire its modem business are understood to have started last summer, according to The Wall Street Journal, when Swan arrived with a focus on cleaning up the company and addressing its loss-making segments. As a result, selling off the business while retaining options to develop modems for next-generation devices would seem to be the most sensible option available to Intel. We have long respected Apple and we're confident they provide the right environment for this talented team and these important assets moving forward.

But it's unlikely that homegrown Apple modems will equip the iPhone 11 since the deal will only close by the fourth quarter of 2019.

What's more, the U.S. chipmaker's modems have consistently outperformed Intel's alternatives, boasting "double-digit gains" in latency and "triple-digit gains" in download and upload speeds, so it's going to take a hell of a lot of work to knock it from its market-leading perch. It's not just about the iPhone and other products Apple now sells, of course, because all these businesses will also design chips for future Apple products like AR glasses and perhaps even cars. 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. As Apple's SVP of hardware technologies, Johny Srouji, said the acquisition will "help expedite our development on future products and allow Apple to further differentiate moving forward".

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