Intel in advanced talks to sell its smartphone modem chip division to Apple
The deal is valued at $1 billion, according to the sources
Intel and Apple are currently in "advanced talks" over the sale of the chip giant's smartphone modem chip division.
The usual 'people familiar with the matter' told the Wall Street Journal that the deal is valued at $1 billion and could be finalised as early as the next week, if all goes well. The deal would cover a portfolio of Intel patents, too, as well as staff, and would help Apple take more control over the development of key components powering its devices.
According to the WSJ report, Apple would also buy Intel's work in developing 5G chips. The two companies have been in talks for the past year, the report claimed. But, the dialogue was stalled in April after Apple reached a deal with Intel competitor Qualcomm, following years of legal dispute over royalty payments.
Following that deal, Intel also announced its decision to quit the 5G modem chip business, saying there was "no clear path to profitability" in the smartphone modem business, after having lost its main customer.
"We are very excited about the opportunity in 5G and the 'cloudification' of the network, but in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns," Intel CEO Bob Swan said at that time.
"We are assessing our options to realise the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world," Swan added.
According to some reports, the company was forced to take the decision as its 5G modem chip division was losing nearly $1 billion a year. The chipmaker also issued a profits warning in April, after lowering its revenue and earnings forecasts for the second quarter and the rest of 2019.
As part of the new deal, Apple and Qualcomm agreed to "dismiss all litigation" against each other in various countries. The two companies were engaged in a multi-front clash that could have required Qualcomm to pay billions to Apple.
At the core of the dispute were the royalties that Qualcomm charged for its patented modem chips. Qualcomm was accused of inappropriately taking advantage of its dominance in the industry to charge excessive fees for access to its patented technology.
Qualcomm, however, denied all those allegations and alleged that the iPhone maker was abusing its position to negotiate prices down.
After they reached the settlement, a new licensing contract and a multi-year chipset supply agreement between the two companies were announced.
Qualcomm has also been accused of abusing its dominance in the market to lock-out rivals, while recently getting slapped with a €242 million fine from the European Commission for driving a potential rival, start-up Icera, unfairly out of the market.
The iPhone maker has been working on its own modem chip technology since at least 2018, but it is expected to take a few more years before those chips are ready for use in iPhones and iPads.
Purchasing Intel's modem chip division would boost Apple's efforts to develop its modem chips in house, eventually making the company even less reliant on Qualcomm. It already designs its own ARM-based microprocessors for use in iPads and iPhones, while rivals typically use Qualcomm SoCs.
Last year, Apple also reportedly been trying to poach Intel engineers to work at a new chip development lab in Western Portland, Oregon, not far from Intel's own manufacturing, research and development centre in Hillsboro.