This afternoon, it became official: pending regulatory approvals, Apple will acquire the majority of ’s smartphone modem business. The deal includes IP, equipment, leases, and roughly 2,200 Intel employees, to the tune of roughly $1 billion. This was almost destined to be, from the very day that Apple announced Intel would be its modem supplier of choice. Intel struggled to compete with the likes of Qualcomm, and delays eventually led Apple to switch suppliers back to Qualcomm —which took away Intel’s biggest and most significant modem customer and they’re lucky to have gotten at least something for their efforts. I went on the record earlier this year with Molly Wood from Marketplace Tech to give a breakdown of exactly why this would happen, but now I’d like to go into even more depth on what will happen next and why.
Apple has wanted to build its own modems for a very long time. Apple’s entire chip business is predicated on integration and cost optimization. Apple owns the operating system and it owns the SoC, so why shouldn’t it also own the modem? Furthermore, its biggest silicon competitor is Qualcomm, who already integrates its modems into its Snapdragon SoCs. Apple loves to do things in-house and if it can, it will. Modems are just the next step on Apple’s journey to integration, albeit perhaps one of the most expensive and complex steps to date.
Intel’s biggest push on modems really began last year when it announced it would spin up a 1,000+ person 5G modem division in San Diego. That was increased to 1,200 people earlier this year, announced days before Apple’s now-settled lawsuit with Qualcomm began in San Diego. I suspect that Apple will continue to expand and hire. Apple acquired Intel’s modem business because it would have taken it a minimum of 5-10 years to build a modem business of its own from scratch. With Intel’s teams and IP, it can likely shorten the time to 3-5 years for a top-to-bottom Apple design (while Apple likely inherited some of its own designs from Intel, I’m sure it has some things it wants to change). We could also see an Apple SoC with a built-in modem within that timeframe as well—something that Intel struggled to accomplish. Since Apple likely isn’t married to Intel’s fabs, it can probably go with its already TSMC-optimized SoC designs and manufacture a chip with a modem inside with fewer problems.
Apple still has a modem supply and licensing agreement with Qualcomm, which means it is not going to kick Qualcomm to the curb right away. What will more likely happen is that Apple will work diligently to build a 5G modem that caters exactly to its future needs, which can be integrated into all of its custom SoC designs and give it complete control of connectivity. There is also a significant amount of RF design for 5G that needs to be accounted for, especially with mmWave. Many have struggled with this, including Intel. RF gets more complex with 5G since you’re dealing with even more types of bands, bigger bandwidths, and eventually supporting both mmWave and Sub-6 5G concurrently. RF is hard, and that’s part of the reason Qualcomm has been able to keep its leadership position for so long.
It’s really unfortunate to see Intel get rid of this division; the company had the potential to be a real supplier to more than just Apple. At the end of the day though, things just weren’t moving fast enough for Intel to compete with Qualcomm and satisfy its only customer. My biggest concern for Intel is how this will impact its future PC business; Intel’s lack of cellular connectivity could be a weak point for Qualcomm to attack. I expect that other ARM vendors will join Microsoft ’s Always Connected PC initiative, and Intel will have a harder time competing with these devices if it doesn’t have a modem. While it could do something similar with Wi-Fi, LTE and 5G connectivity are going to absolutely be necessary for personal computing devices in the future. It’s not a matter of if, but when.
Overall, this brings the number of smartphone manufacturers with their own in-house modem teams to three: Apple,Huawei , and Samsung. This is a crucial advantage that allows these companies to cater and optimize their modems to their own devices. I think this move could help Apple become more competitive with Huawei and Samsung. Apple could potentially give Qualcomm a run for its money, too, though it will be costly to compete and there’s still a very high chance Apple would have to license some IP from Qualcomm. In conclusion, I believe that Apple got exactly what it wanted out of this transaction. It was a long time coming.