Apple is in talks to pay $1 billion or more for Intel’s smartphone modem chip business, according to unnamed sources cited in a Wall Street Journal report.
The possibility that Intel would sell its patents and staff used to develop modem chips for 5G has been discussed by analysts and chip makers in recent months. In April, Intel announced it would exit the 5G smartphone modem market because there was no clear path to profitability. Intel was expected to supply Apple with smartphone 5G chips by 2020.
Apple has been laying some of the groundwork for creating its own 5G modem production. The iPhone maker has hired some engineers from Intel and announced plans for a San Diego office with 1,200 workers.
Intel’s 5G smartphone modem business had been losing $1 billion a year, according to a person familiar with the business cited in the WSJ article.
Apple had already been in talks with Qualcomm to supply 5G modems when Intel made its announcement in April to depart the business. Apple reached a multiyear supply agreement with Qualcomm, the WSJ said. Apple and Qualcomm had previously been in a two-year legal battle over wireless royalties that Qualcomm charges.
Part of the timing for Intel to exit the 5g modem business came after former CEO Brian Krzanich resigned last summer. He had promoted the 5G modem business. When Bob Swan became CEO in January he undertook a process of cutting losses.
Intel reports earnings on Thursday and Apple will report its fiscal third quarter next week.
One analyst said the potential deal could benefit both companies. “Divesting the 5G modem business makes sense, given Intel’s resource requirements in other more strategic initiatives like AI and cloud and edge,” said Jack Gold, an analyst at J. Gold Associates.
“For Apple, this is a long-term strategic buy to make them more vertically integrated and eliminate their dependence on others in 5G modems,” Gold added. “Apple wants to control its own destiny and not have to rely on Qualcomm.”