In a move that has been rumored off and on for months, Apple bought Intel’s Modem business for a reported price of $1 billion. It’s a win-win for both parties, as Apple gets to move toward more control of their devices and Intel gets to offload what turned out to be a bad investment for them. This move barely puts a dent in Apple’s $225 billion dollar pile of cash, so it’s a good deal for all involved.
I guess the obvious question is, why now? We may not know that exact answer for a long time, but it certainly looks Apple used this move as the second in its plan to line up its short term and long term future for modems and 5G. They patched things up with Qualcomm this spring, insuring their chips for this year’s iPhones and likely 5G for next year. While they still have to do business with their frenemies for the time being, at least they have insured the security of their supply chain for the time being.
As for the future, Apple has now set themselves up for a faster transition to their own 5G chips. Using the intellectual property and patents just acquired from Intel, they should be able to move forward with their own modems faster than experts originally thought. They also got 2,200 new employees in the bargain, as well, which certainly doesn’t hurt. Several of them will be experienced chip designers. At the end of the day, this move could shave a year or two off of the 5G modem development cycle, which could put Apple-designed chips in an iPhone by 2021.
At the end of the day, this looks like a smart move on Apple’s part. We have ample evidence of their skill in chip development and integration and optimization with their devices. Creating their own 5G chips should lead to huge gains in efficiency over time. Modem chips are one of the biggest power draws in smartphones, so optimization is key. It also happens to be a specialty of Apple’s chip designers so far, so them taking full control over the modem should be a big positive.
As big as this is for the iPhone, it could be even bigger for the Apple Watch. That device requires simultaneous optimization and miniaturization because of the size constraints involved. Complete control of the stack should help Apple to further enhance battery life and performance, even as the device gets thinner and lighter over time. LTE and future 5G performance are also key to the Apple Watch becoming an independent device, which is also vital to Apple increasing its sales potential. That makes this Intel deal critical to the future of Apple’s fastest growing piece of hardware.