Apple Inc. (NASDAQ: AAPL) is in the process of purchasing Intel Corp.’s 5G smartphone modem division. The billion dollar deal will give Apple access to proprietary communications technology, tens of thousands of patents, and over 2,000 staff.
Apple is purchasing the division to strengthen its future in a market where 5G will dominate. Intel is offloading the unit so that it can focus on 5G technologies for computers, IoT devices, and infrastructure.
Here are the details of the deal, and what it means for the market.
Biggest 5G Deal on the Market This Year
The deal is expected to be completed by the fourth quarter of this year, although regulatory approval will need to be obtained first.The company will pay Intel $1 billion for its smartphone modem division.
There will be more than 17,000 patents included in the deal, giving them access to a mountain of intellectual property that could be used in future product development. 2,200 employees will join Apple from Intel, although it hasn’t been made clear whether there would be job cuts in the long-term.
Apple’s decision to purchase the division will be a surprise to some investors. While Intel did announce in April that it would be leaving the smartphone-modem business, it wasn’t confirmed that the division would be sold.
Intel isn’t pulling out of the 5G market altogether. It will continue to research and develop technologies for infrastructure, data centers, and personal computers.
Deal Will Reduce Apple Reliance on Qualcomm
Apple doesn’t produce its own smartphone modems and has instead relied on Intel and Qualcomm products in the past. The acquisition of Intel’s patents and technology will give the company a competitive advantage. It is likely that there will be a 5G iPhone in 2020, which will feature Qualcomm modem hardware. Future units will likely use proprietary of hardware based on Intel’s patents.
Apple and Qualcomm still have a “multiyear chipset supply agreement”. It has tried for years to develop its own modems, and the acquisition of Intel’s division will now speed the process. Analysts believe that the company could have its own chipsets ready by 2022.
This is one of Apple’s largest acquisitions. It typically prefers to invest in smaller technology companies with intellectual property that can be quickly integrated. The $1 billion agreement with Intel is an indicator of just how important 5G is to the future of Apple.
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