Apple has confirmed what many were expecting, that it is to purchase Intel’s smartphone modem business, in a deal valued at $1bn (£804m).

This is Apple’s second largest acquisition after its 2014 purchase of headphone manufacturer Beats Electronics for $3bn (£1.8bn). But this modem chip unit acquisition from Intel had been widely expected.

This was because earlier this week the Wall Street Journal reported that Apple was in ‘advanced talks’ to acquire Intel’s smartphone-modem business. And last month the Information reported that Apple was talking with Intel about the purchase of its German modem business.

Modem acquisition

Intel’s modem business will give Apple the necessary chips for its iPhone devices to connect to wireless networks, an area Apple has been keen to move into, despite it surprising many in April when it kissed and made up with Qualcomm, and halted all legal action between the two.

That settlement saw Apple agreeing to make an undisclosed payment to Qualcomm, and to use Qualcomm’s modem chips going forward. But it seems that some within the iPad’s maker management team are determined to reduce Apple’s dependence on Qualcomm’s modems as soon as possible.

“Approximately 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases,” said Apple.

But perhaps one of the most important elements of the deal, other than the chip expertise from the personnel, is the sheer number of patents that Apple will gain.

“Combining the acquired patents for current and future wireless technology with Apple’s existing portfolio, Apple will hold over 17,000 wireless technology patents, ranging from protocols for cellular standards to modem architecture and modem operation,” said Apple.

However it seems that Intel will retain the ability to develop modems for non-smartphone applications, such as PCs, internet-of-things devices and autonomous vehicles.

Intel’s decision

“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,” said Intel CEO Bob Swan. “We have long respected Apple and we’re confident they provide the right environment for this talented team and these important assets moving forward.”

“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,” said Johny Srouji, Apple’s senior VP of Hardware Technologies. “They, together with our significant acquisition of innovative IP, will help expedite our development on future products and allow Apple to further differentiate moving forward.”

It seems that until Apple has its own chips ready, it will continue using Qualcomm modems (it has a six year licensing deal with Qualcomm) for its handsets.

Intel had always been going to offload its modem division, ever since since the chip giant announced in April “its intention to exit the 5G smartphone modem business” altogether, hours after Apple and Qualcomm made their settlement announcement.

Intel’s modem business is located around the world, but its foundation is in Germany, where the chip maker Infineon, whose modem operations Intel bought in 2011 for $1.4 billion, is based.

Smartphone modems

Apple had been using Intel chips until recently, after it dropped Qualcomm modems during its huge bust up with the firm.

But on the surface it seems that Apple was never really happy with Intel (or maybe just its pricing). Last July for example it was reported that Apple was considering moving away from using Intel’s 5G modems in future iPhone handsets.

And in April this year it was reported that Apple was losing confidence in Intel’s ability to hit its deadline for the 5G modems.

Intel had said last November that it only expected to ship the 8160 5G modem in the second half of 2019, but Apple needed it by July this year in order to meet future handset release dates.

Chip independence

Apple has also reportedly bolstered its in-house engineering team to between 1,000 and 2,000 engineers to work on its own 5G modem chip.

On top of that, Apple has reportedly hired a number of Intel executives. For example, Stefan Wolff, who previously managed the chipmaker’s German modem team, joined Apple from Intel earlier this year.

Apple also reportedly poached Umashankar Thyagarajan, the head of Intel’s now-defunct modem biz, back in February.

Apple it should be remembered is not afraid to acquire companies for the technologies they develop. Last October for example, Apple acquired parts of the business of UK-based Dialog Semiconductor.

Apple paid $600m (£454m) for a combination of patents, engineers, and facilities in multiple countries, as it seeks to control the Dialog power management integrated circuits (PMICs) found in all nearly iPhones.

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Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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