Apple is in the final stages of negotiations to buy most of Intel's modem chip business, reports The Wall Street Journal. The newspaper says that the agreement, valued at $ 1 billion or more, could be finalized in the next week. The agreement would involve the transfer of talent, as well as patents related to modems.
Intel's wireless service dates back to at least 2011, when the company bought Infineon Technologies for $ 1.4 billion. Intel hoped to become a great rival for Qualcomm, which has played a dominant role in the wireless chip market.
But Intel has struggled to gain traction. This is because Qualcomm negotiated restrictive contracts with potential Intel customers that prevented them from considering a second provider. After Apple began sending iPhones with Intel chips inside them in 2016, Qualcomm filed for Apple, demanding a patent infringement and finally rejecting the supply of chips for new iPhone models, which makes Apple dependent on Intel For those chips.
But, Intel reportedly struggled to develop 5G wireless chips in time to be included in Apple's next iPhone 2020 model. So in April, Apple resolved its broad legal war with Qualcomm. Apple's decision to make peace with Qualcomm evidently destroyed Intel's chances of making its modern business financially viable, as Intel announced hours later that it was abandoning the 5G modem business.
The following month, a federal judge ruled that Qualcomm had participated in almost 20 years of anti-competitive conduct to maintain its dominant position in the wireless chip business, a behavior that was detrimental to prospects of potential competitors such as Intel. In theory, that should have given Intel's chip business a boost, but Intel doesn't really want to renew its chip manufacturing efforts. Instead, it is said that Intel is trying to download the staff and patents of its modern efforts at Apple.
Apple's efforts to buy Intel's chip business are an extension of Apple's broader strategy of developing as many components as possible in the company. The acquisition of Intel's modem chip division could help Apple to self-supply also in regards to modem chips. Apple has already made some progress in this direction, by building an important office in San Diego, the metropolitan area where Qualcomm is headquartered and where Intel was doing much of its wireless chip work.
It has its own modems that have the technical benefits for Apple, which allows the company to integrate its modem chips with other iPhone components. You can also protect Apple in the case and the application courtesy of the May antitrust resolution against Qualcomm. If that happens, we can expect to receive large royalty payments from customers, so it would be of interest to Apple to make its own wireless chips.