Today, the two companies- Apple and Intel announced that around 2,200 Intel employees will join Apple. Apple will acquire “the majority” of Intel’s smartphone modem business for $1 billion and will acquire IP and equipment from Intel as well. Most importantly the transaction between both the companies is expected to be closed by the end of the year.
Mr Swam, CEO of Intel said that this acquisition doesn’t state that Intel will be moving out of the modem business. It will still be able to develop modems for PCs, Internet of Things devices, autonomous vehicles, and for anything that’s not a smartphone. He also said that this accession will only the company to focus on developing other 5G technologies. The acquisition means that Apple can produce its own 5G modems for its smartphones and it now it does not have to depend on Qualcomm (the dominant supplier of smartphone modems) for the hardware.
In the past, Apple accused Qualcomm of charging “disproportionately high” fees in patent royalties. Now as the 6-year patent licensing agreement between Apple and Qualcomm has been completed, the company will rather focus on developing the modems of its own. As per the recent news, Apple’s in-house modems will be ready to use in 3 years.
Johny Srouji, Apple’s SVP of hardware technologies said that the acquisition will to expedite the company’s development on future products and will allow Apple to further differentiate moving forward. Moreover, developing its own modems has the potential to deliver big and advance benefits of Apple. The acquisition will allow the company to design and develop modem technology at its own pace, better integrate those modems with its products, and develop new features that set its devices apart.
Acquiring another business to develop an in-house competitor is a tactic Apple has used earlier too. It has spent $300 million to acquire part of Dialog, a company that previously supplied Apple with power management chips for its phones. At that time, the acquisition included 300 employees and it was Apple’s biggest ever in terms of headcount.