Apple advanced talks with Intel to buy its smartphone modem chip business for $1 billion, reports WSJ

On Monday, the Wall Street Journal reported that Apple is in advanced talks to buy Intel’s smartphone-modem business for at least $1 billion, citing people familiar with the matter. This Apple-Intel deal that will cover a portfolio of patents and staff, is expected to get confirmed in the next week.

According to the report, the companies started discussing this deal last summer around the time Brian Krzanich, Intel’s former CEO resigned. However, the talk broke when Apple signed a multiyear supply agreement for modems with Qualcomm in April to settle a longstanding legal dispute between the companies. The dispute was regarding royalties Qualcomm charges for its smartphone modems.

After Apple’s settlement with Qualcomm, Intel announced its plans to exit the 5G smartphone modem business. The company’s new CEO Bob Swan said in a press release that there is no “path to profitability and positive returns” for Intel in the smartphone modem business. Intel then opened this offer to other companies but eventually resumed talks with Apple, who is seen as the “most-logical buyer” for its modem business.

How will this deal benefit Apple

This move will help Apple jumpstart its efforts to make modem chips in-house. In recent years, Apple has been expanding its presence in the components market to eliminate dependence on other companies for hardware and software in its devices. It now designs its own application processors, graphics chips, Bluetooth chips, and security chips.

Last year, Apple acquired patents, assets, and employees from Dialog Semiconductor, a British chipmaker as a part of a 600 million deal to bring power management designs in house. With this deal, the tech giant will get access to Intel’s engineering work and talent to help in the development of modem chips for the crucial next generation of wireless technology known as 5G, potentially saving years of development work.

How will this deal benefit Intel

This deal will allow Intel to part ways from a business that hasn't been much profitable for the company. “The smartphone operation had been losing about $1 billion annually, a person familiar with its performance has said, and has generally failed to live up to expectations,” the report reads. After its exit from the 5G smartphone modem business, the company wants to put its focus in 5G network infrastructure.

Read the full story on the Wall Street Journal.

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