Apple And It’s 5G Business
This is a critical component as the modems essentially will connect your devices to the cellular network and this would help Apple a lot with 5G compatibility. Apple and Intel have been in talks for over a year now but if it does go through, it could be finalized as soon as next week according to the Wall Street Journal.
It is speculated that the deal is all about money as Intel will get $1 billion or more. But in reality, the deal is not really about money as these companies are valued in hundreds of billions of dollars. Apple right now has almost $113 billion of net cash and this deal is more of a strategic move by Apple than anything else.
Firstly, this deal will benefit Apple because they will get the patents and will help Apple become more self-sufficient which is what CEO Tim Cook always talks about. Apply will not have to rely on third parties for their hardware technologies if the deal goes down successfully. It would also give Apple the talent that Intel has been developing over the years. Maybe, in the future, Apple would be able to develop its own modems for 5G.
Also, the deal will be beneficial for Intel because their mobile business hasn’t been great and they have been losing billions of dollars annually. They tried to make smartphone chips which didn’t work out and now it’s their modems which are not getting the job done. So, if this deal with Apple does go through, it will simply mean that Intel will get rid of it completely. The staff, patents, and IP will be offloaded to Apple and hence it will no longer be Intel’s problem.
Intel is not a big player in the 5G modem space but Qualcomm is. Currently, Qualcomm is Apple’s current supplier for this type of chips. So Apple will continue using Qualcomm chips at least in the short term for the foreseeable future but this will allow Apple to become less dependent on Qualcomm in the long term.
The deal will allow Apple to gain around 2200 Intel employees, some equipment, intellectual property, and patents as well. The deal is likely to complete in Q4 of 2019. Apple has closed such deals in the past as well and as said above, this is a step by them to become self-sufficient. Apple accused Qualcomm of charging excessive fees. During the case, they had to take chips from Intel to put in their iPhone XS. To settle the dispute, Apple and Qualcomm signed a six-year licensing agreement. Soon after this happened, Intel decided to quit the 5G business.
5G capable iPhones will hit the market later this year. The first lot of 5G iPhones will make use of Qualcomm chips. Apple products are known to use separate components for processor and modem whereas other manufacturers combine the processor and modem into one component. What Apple does only adds more cost and bulk to their devices.
Using Intel chips, Apple will be able to combine the processor and modem. This will take Apple to a greater level of self-sufficiency and they will be able to control their products. Once the six-year deal with Qualcomm comes to an end, Apple will not have to pay them any royalties. All in all, this is a pretty smart move by Apple.