Apple buys Intel's smartphone modem unit in $1 billion deal

The deal covers about 2,200 Intel employees, intellectual property, leases and equipment

Apple is to acquire Intel's smartphone modem business in a $1 billion deal.

The transaction, which had been anticipated earlier this week, is expected to close in the fourth quarter of 2019, subject to regulatory approvals and other customary conditions. It will cover about 2,200 Intel employees, intellectual property, leases and equipment.

When the process is complete, Apple will have more than 17,000 wireless technology patents, ranging from modem operation and architecture to protocols for cellular standards.

Intel will still have the freedom to develop modems for non-smartphone devices, such as personal computers, IoT devices, autonomous vehicles, and other products.

Intel was seeking to shed its smartphone modem unit for the past couple of years as the business was costing it too much money to support just one customer - Apple - which was poised to switch back to Qualcomm. The unit was built out of Intel's $1.4 billion purchase of Infineon's wireless business about a decade ago.

Intel CEO Bob Swan said that the latest deal with Apple will enable Intel to focus on developing other 5G technologies.

"This agreement enables us to focus on developing technology for the 5G network while retaining critical intellectual property and modem technology that our team has created," Swan said.

The deal will also help bring key patents, as well as engineering talent, into Apple, enabling it to more speedily design key components needed to connect its devices to the mobile internet. The purchase will also help reduce Apple's dependence on Qualcomm for the hardware.

Johny Srouji, Apple's senior vice president, said that the move would speed up the "development on future products and allow Apple to further differentiate moving forward".

The iPhone maker has been working on its own smartphone modem technology for the past few years, with the company establishing new R&D centres in the US to speed up the effort.

Some reports a few months back also claimed that Apple had offered jobs to engineers from Qualcomm to work on 5G modem technology. More recently, the company said that it was planning to hire some 1,200 employees for its San Diego, California office.

Last year, Apple also reportedly tried to poach Intel engineers to work at a new chip development lab in Western Portland, Oregon, which was not far from Intel's own manufacturing, research and development centre in Hillsboro.

Apple and Intel have been engaged in talks for the past one year about the sale of Intel's model business. The dialogue was, however, stalled in April after Apple reached a settlement with Qualcomm, following years of legal dispute over royalty payments.

As part of the new deal, Apple and Qualcomm agreed to "dismiss all litigation" against each other in various countries.

Following that deal, Intel also announced its decision to quit 5G modem chip business, saying there was "no clear path to profitability" in the smartphone modem business.

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.