Apple Buys Intel's 5G Modem Biz for $1B

As expected, Apple announced an agreement to purchase Intel's smartphone modem business for $1 billion.

The move positions Apple to build its own 5G modems for its phones and other devices. That action would align with Apple's desire to be a "vertically integrated" company that designs its own components, and also would dovetail with the company's desire to eliminate Qualcomm as a supplier.

As part of the new transaction, roughly 2,200 Intel employees will join Apple. The company will also acquire an unspecified number of Intel patents. Apple said it expects the transaction to close in the fourth quarter of 2019.

The announcement is not a surprise. Publications including The Information and the Wall Street Journal reported that Intel and Apple were in advanced discussions for such a deal.

Apple's purchase of Intel's modem business comes just three months after Intel stunned the tech market by announcing that it would exit the 5G smartphone modem business. On the same day Apple announced a "multiyear" agreement with Qualcomm for its chips, alongside a six-year license for Qualcomm's patents. The transaction ended years of acrimonious litigation between the two companies.

But now, though, Apple clearly is positioning itself to replace Qualcomm's chips with its own chips, based on Intel's designs. The only real question is when Apple might replace Qualcomm's chips with its own chips. Given that the chipset supply agreement between Qualcomm and Apple is described as a "multiyear" deal, it's reasonable to assume that move won't happen in the near term.

Nonetheless, Qualcomm's stock fell 1% in after-hours trading in the minutes following Apple's modem-purchase announcement with Intel.

Apple is widely expected to release its first 5G iPhone next year, likely powered by Qualcomm's chips.

— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano