In 2016, Apple started manufacturing the iPhone with modem chips from Intel. Qualcomm long supplied these chips for Apple’s mobile hardware. The Cupertino-based company never wanted to embrace Qualcomm’s exclusivity deal for its modem chips. When Apple made the switch to Intel, Qualcomm decided to sue the company and stop supplying modems. Both companies remain on uneasy ground with each other. However, recent reports note Apple is looking to secure Intel’s modem business and patents for $1 billion.
Apple loves to exert as much control as possible on its manufacturing process. In recent years, the company has attempted to exert more of this control. More and more processes continue to be brought under Apple rather than manufacturing partners. It’s unsurprising to see Apple go after Intel’s modem business with an aggressive offer. In fact, many analysts have assumed for quite some time Apple would take over Intel’s patents. The move makes sense for both companies, and a deal could be announced soon.
Acquiring Intel’s modem business benefits Apple in many ways. First and foremost, the move would give Apple full control over iPhone modem chips and its own 5G future. This could lead to better harmonization and integration for iPhone hardware and software. A deal like this could help Apple save billions of dollars in the long run. Plus, tighter control and less reliance on a partner company can only bring benefits. Apple could also continue to fight back against Qualcomm and create a viable side business as well.
On the other hand, Intel benefits from this transaction in more subtle ways. The company acquired its mobile modem business from a competitor back in 2011. Most analysts would describe Intel’s performance since then as mediocre. Qualcomm continued to secure exclusive contracts with smartphone manufactures, and Intel never gained traction in the market. However, offloading this entire business segment to Apple would give Intel more cash on hand and the ability to focus on its CPU and GPU products.
In the end, a $1 billion offer for Intel’s modem business makes sense for Apple. Both Apple and Intel benefit in different ways from the transaction. Qualcomm, however, could face stiffer competition from Apple. For now, Qualcomm remains the king of mobile processors and modem chips. Apple could set the seeds for an eventual takeover of the market with this purchase, though. It remains to be seen what happens, but a sale seems more likely than ever at this point.
Dil Bole Oberoi
