We have documented the difficulties that Apple has had securing 5G modem chips for the iPhone, and the surprise settlement with Qualcomm that gives Apple a multi-year chip supply agreement with the chip maker. Apple already bit the hand that feeds it once when it testified against Qualcomm's controversial chip selling practices in front of the Korean FTC. At the time, Apple was getting its modem chips exclusively from Qualcomm and was earning a $1 billion incentive payment every year. But Apple's testimony and decision to also use Intel's modem chips on the iPhone 7 led to the nasty legal feud between Apple and Qualcomm once the latter stopped cutting those billion dollar checks.
Now that Apple and Qualcomm are getting along again, Apple wouldn't dare bite that hand once again, would it? Well, The Information is reporting tonight that Apple is in talks to buy Intel's smartphone modem chips operation based in Germany. This dovetails perfectly with talk that Apple wants to develop its own modem chips so as not to be beholden to another company for this key part. Remember, Intel announced its intention to leave the mobile 5G modem business the very same day that Apple and Qualcomm announced their agreement. Back in April, there was a report that when Apple was desperate for a source of 5G modem chips, it decided to explore the possibility of buying Intel's mobile modem chip unit. It appears that those talks never stopped.
Apple could have its own modem chip in place by 2025
With the deal, Apple will also pick up a large number of engineers well versed in the smartphone end of Intel's modem chip business. This could certainly be seen as a "win" for Apple if the deal does go down. There is no word on how much Apple would pay Intel for the operations, but it could be one of the largest acquisitions that Apple has made. Right now, the $3 billion purchase of Beats Audio back in 2014 is the biggest purchase Apple has ever closed. Typically, the tech giant goes after smaller outfits operating in a niche market and quickly employs the innovations it acquires. For example, back in 2012, it bought biometric firm AuthenTec for $356 million and the very next year the company's technology was used to debut the Touch ID fingerprint scanner on the iPhone 5s. Back in 2010, Apple bought Siri, a company that offered a limited virtual assistant app in the App Store. The very next year, the iPhone 4s introduced the native Siri assistant on iOS. In 2015, Apple purchased Israeli imaging company LinX for a rumored $20 million helping Apple improve the cameras on the iPhone.
Rumors that Apple was designing its own modem chips for the iPhone go back to November 2018, and last month a report said that we might not see Apple's own modem chips inside an iPhone until 2025, four years later than originally thought. Apple already designs the Ax SoC used to drive the iPhone, iPad and iPod touch. The chip itself is actually manufactured by TSMC. Apple is expected to unveil a 5G iPhone in 2020.
One person allegedly briefed on the deal between Apple and Intel says that it will include Intel patents and products. Meanwhile, Qualcomm investors see this news as a threat to the company's future profits. When this story broke after the 4 pm EDT close of the U.S. stock market, Qualcomm's shares declined 1.8% to $69.98. It has been quite a roller coaster ride for Qualcomm investors as the stock soared from $55.90 on April 11th to $89.29 by May 3rd on the strength of the settlement with Apple. But after a negative court decision that could force Qualcomm to change how it sells chips, the stock plunged to $65.37 and has since been trying to recover.