Apple Buys Intel's Smartphone Modem Business: Its All About 5G
Last week brought some good news for ardent Apple loyalists as the brand announced the acquisition of Intel’s Smartphone modem business. The deal will mark the movement of close to 2,200 employees from Intel to Apple along with equipment, leases and Intellectual Property. The $1 billion transaction, which will prove beneficial in rolling out the iPhone maker’s 5G plans, will be completed by the end of the year.
This is the second-most expensive deal struck by the company after it acquired Beats Electronics for $3 billion in 2014. The move came after Apple got into a dispute with Qualcomm, which has now been settled. It will allow the company to work towards the development of its own modems and decrease its dependency on third-party suppliers.
Entrepreneurs can take a cue from the way Apple handled the situation and paved its way for 5G development. Whether you are an entrepreneur or are planning to acquire a profitable business for sale in the United States, this calculated business deal is sure to act as a guiding force for smart acquisitions and building internal systems. Let us have a look at what made Apple take the big step.
The Recent Royalty Row With Qualcomm
Problems between Qualcomm and Apple started emerging two years back in 2017 when the latter filed an antitrust case against the former stating that Qualcomm was misusing its power of being the only supplier for cellular technology. The company argued that they were burdened with the prices quoted by Qualcomm and had to pay a hefty licensing fee for its patents while using its chips.
The legal dispute, which went on for two years and was based on the use of modem chips, was settled in April 2019. As per the settlement, Apple will make a one-time payment to Qualcomm and sign a chipset supply agreement. The decision was taken as Apple was keen to build its own modems as it could not depend on Intel or Qualcomm 5G chips which will take too long to process.
Also, partnering with Huawei would not have been a good idea due to the recent trade challenges. The settlement allows Apple to utilize Qualcomm’s modems for another six years. The company can leverage this time to work upon Intel’s Smartphone modems and get ready for competition with Qualcomm. This leaves them with a lot of time to perfect the technology and gain a bigger market share.
The History Of Modem Development
While Apple was fighting a legal battle with Qualcomm for charging exorbitant fees in patent royalties, they were dependent on Intel’s modems. However, now that the dispute is over and Intel’s modem business unit has been acquired by Apple, the tables have turned.
Additionally, Apple has announced that it will be recruiting close to 1200 employees in San Diego, which happens to be the global headquarters of Qualcomm. A similar strategy to build an in-house capability was adopted by Apple earlier through the acquisition of a part of chipmaker Dialog for $600 million.
The deal allowed them an intake of 300 engineers from Dialog which had been providing them with power management chips for Smartphones. Apple initially wanted to replace Qualcomm with Intel as the supplier of modem chips. However, issues with the implementation of the technology made sure that it would not appear in the new iPhone launches made in 2020.
How Are The Others Faring In 5G Race?
Systems-on-Chip (SoC) have been developed by only a handful of tech companies till now including Qualcomm, Huawei and Samsung. Another competitor in the race is Taiwan’s MediaTek which has announced that it will come up with its 5G SoC devices by March 2020. As far as Qualcomm is concerned, it still has its six-year deal with Apple and will keep supplying modems to the tech giant.
After the agreement is over, their partnership will cease to exist. However, it won’t be the end of the road for Qualcomm which will still remain the supplier of modems for Android phones, which have a significant global presence. Meanwhile, Apple will be working towards the development of its cellular technologies with the help of its acquired Intellectual Property and a broad base of engineers.
Bright Future Ahead For Apple
The acquisition of Intel’s Smartphone business has filled Apple’s technology portfolio with more than 17,000 wireless technology patents. These include protocols for cellular standards, modem operation and architecture, etc. Intel didn’t have much choice but to sell its technology as the dispute between the two tech companies settled.
Also, Intel announced that it would not be working on developing 5G modems for Smartphones just after the news of the settlement came out. Contrary to this announcement, Intel had said in November last year that it was expediting 5G modem tech. Now, it will be investing in creating 5G infrastructure technology.
Also, it will continue to build modems for non-smartphone applications such as the Internet of Things, self-driving cars and computers. Apple and Intel will together focus on developing technology for 5G network to satisfy the needs of its global customer base. It has been a progressive move for both the tech companies as Intel was primarily losing a lot of money on the modem development unit.
It is a smooth road ahead for Apple which now can exercise full control over the 5G enabled modems which will bring its mobile sets at par with other competitors at the time of launch of the superior phones in the market. It will also reduce their reliance on third-party suppliers as they will be doing the development work in-house.
This goes to show that Apple knows all the tricks of successfully buying a business and managing it. At this pace, Apple can come out with its own modems in just three years. It will further enable them to create advanced Smartphones and tablets which will outperform the competition.
Although Apple will have to wait to provide its customers with 5G modems in their handsets, it seems to have won the 5G battle as it will become self-sufficient in the technology in the next five-six years. This deal is a superb example to be studied and followed by entrepreneurs planning to purchase a business for sale in the United States. This is the kind of business management that takes companies from being start-ups to globally dominant organizations.