Two weeks ago, Apple announced its decision to invest $1 billion to purchase most of Intel’s modem development unit.
What’s Apple’s Real Motivation?
On the surface, it could be easy to assume that Apple’s acquisition is merely a way to move into the modem business. On the contrary, we don’t expect Apple to develop its own mobile modem within at least 2-3 years. Building its own modem is not a prime priority for Apple at this stage, as building mobile modem chips is extremely complex business and Apple could be better off using existing modems from third parties who have spent years, if not decades, amassing expertise and knowhow in this space.
So what's the return they are looking to secure on their investment?
From our vantage point, the primary motivators for Apple are:
- To gain influence within the 3rd Generation Partnership Project, more commonly referred to as 3GPP, the global standards organization that develops and enforces protocols within the mobile industry.
- To acquire Intel’s rich intellectual property portfolio.
This combination of influence and IP will enable Apple to trade and negotiate better deals for 5G royalties, notably with Qualcomm. Apple could also use some of Intel's key 5G patents to differentiate itself in soon-to-be highly competitive 5G market.
How Did We Get Here?
Apple’s acquisition of Intel’s modem business started, ironically enough, with Intel’s own acquisition. In 2011, Intel spent $1.4 billion to acquire the Infineon’s mobile modem business, along with its strong Research & Development team. While the team held a number of standard-essential patents (SEPs) in 2G, 3G, and even LTE, Intel was not able to monetize the IP portfolio.
Now, Apple is betting that it will have better luck.
Here are some other key milestones that led to this transaction:
- 2012: Intel inherited Apple as a key customer for EDGE/HSPA iPhones, but not for LTE. When Apple moved to LTE in 2012, it dumped Infineon and Qualcomm became the sole LTE modem supplier for the iPhone.
- November 2014: Intel announced SOFIA SOC, an integrated Modem-App-Processor. Despite its potential, Intel failed to take it to the commercial market.
- 2016: Intel became the second LTE modem supplier for Apple’s mobile devices.
- 2018: Intel is chosen as the sole modem supplier for Apple’s new iPhone generations.
- May 2019: On the same day that Intel announced it will exit the mobile modem business, Apple announced that it will use a Qualcomm modem for 5G.
Stay Connected To The Latest Changes Impacting 5G
Apple’s acquisition of Intel’s modem business is just the latest example of companies strategically gearing up to take advantage of 5G. Apple will be able to put its stamp on the next evolution of the technology, while simultaneously putting itself in better position to capitalize on the emerging landscape – both on the consumer and non-consumer side.
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