Home / Technology / Apple's $ 1 billion Intel premium goes more than a 5G iPhone

Apple's $ 1 billion Intel premium goes more than a 5G iPhone

Apple has acquired the bulk of Intel's smartphone and modem business – the part that connects devices with Wi-Fi and cellular networks – for a whopping $ 1 billion (£ 800 million). The agreement envisages that approximately 2,200 employees will switch to Apple and the company will acquire intellectual property and devices from Intel.

Apple's phone sales declined in the first quarter of 2019, and progress at 5G was sluggish compared to competitors. This acquisition is the company's latest attempt to control the entire ecosystem of smartphone production. What does this mean for Apple's currently restless development?

"I think nobody is really surprised by the acquisition," says Alan Priestley, an analyst at Gärtner. "There were not so many obvious competitors to buy the group, and Apple has long been known for more control over its own technology."

Apple has relied on Intel and Qualcomm in the production of its smartphone modems, generally splitting orders between the two companies in general. Qualcomm's modems have long been considered faster than Intel's, and the company has been driving the development of 5G modems already integrated into Samsung Galaxy Note 9.

However, there's a reason why Apple has not benefited from these features recently: until April of this year, Qualcomm was involved in a two-year lawsuit. Apple sued the company for blackmailing its position as a dominant player in order to increase royalties while Qualcomm sued Apple for patent infringement. Eventually, the dispute was settled when the companies decided to settle, a decision largely attributable to Apple's failure to obtain competitive modem technology, with Intel rating 5G as behind.

Apple signed a contract with six employees. One-year Global Patent License Agreement with Qualcomm, for which the company provides modems for its phones. Shortly after the agreement, Intel announced it would discontinue the development of 5G modem parts, indicating the lack of demand from Apple or another major competitor. Apple will rely on Qualcomm in the short term, but the purchase of the Intel modem signals the desire to run the entire production cycle on its own. This was first released as the Giant's goal in 2009, when Tim Cook announced to investors that the company would develop the technology needed to differentiate itself from the competition. Some analysts have predicted that Apple-developed modems could be up and running within three years.

"I think we'll see future generations of iPhones with a fully integrated modem," says Priestley, using a discrete modem – most other smartphone providers use integrated modems. "This means that the modem in Apple phones is a separate chip rather than being integrated into the application processor. This is a design feature that requires more space and performance within the modem phone.

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Apple's purchase of Intel reveals a desire to one day capture the rule of modem production itself, without having to rely on third-party vendors. But given the fact that Intel has left Qualcomm behind in the field of modems, will the acquisition allow Apple to compete on that front? "The acquisition is necessary but not sufficient," says Geoff Blaber, vice president of research at CSS Insight. "It will be years before Apple has developed a modem capability that can compete with Qualcomm, and the Intel deal will reduce development time by adding technical resources and strengthening licensing bargaining power." The evolution of the modem Chips is incredibly intense and requires a tremendous capital infusion, world-class technical talent, years of R & D investment, and an impressive portfolio of intellectual property.

Apple has chosen this autonomous approach to smartphone and tablet processor development The iPad was the first Apple-developed processor: the A4, and user-defined chip components have since been used to support features such as Face-ID, Touch-ID data, and step-tracking technology, such as an in-house team Develop selfie-taking technologies a custom The display chip illuminates the iPhone 6S screen three times faster than normal. This approach is rather unconventional in the smartphone business, where companies typically rely on a third-party network to assemble the innards of their smartphones, even though Samsung is also a major chipmaker.

Apple has signaled the desire to create its own modem chip for a while, with reports earlier this year that the company is taking its modem chip engineering efforts from its supply chain unit to its in-house hardware Technology Group had relocated. The company owns chip manufacturing and testing facilities in Cupertino, California and Herzliya, Israel, and in recent years an increasing number of Qualcomm's modem engineers have been hired.

Acquisitions have strengthened Apple's manufacturing capabilities. Most recently, the company bought part of the European chipmaker Dialog Semiconductor to bring more of its silicon design to market. The agreement included $ 300 million (£ 242 million) for the licensing of some Dialog technologies, the acquisition of 300 engineers and the control of some assets. Over the next three years, another $ 300 million was spent on the purchase of Dialog products.

One billion US dollars is probably a pocket money for the giant giant, who sits on a cash pile of 248 billion US dollars (200 billion pounds). But despite its revenues and cash reserves that overshadow other smartphone companies, the tech giant has been declining lately.

While Apple seemed to be on its way to capturing the largest share of Samsung's global smartphone market by the end of 2018, it has since taken third place behind Huawei (suffering its own problems for six months). The company is also late in the development of 5G phones. The launch of an Apple 5G phone will be billed next year at the earliest, while others, including Samsung, Huawei and Motorola, have already launched 5G phones. Considering how damaging this could be for Apple, it's important to keep in mind that Apple is rarely ahead in terms of connectivity: it did not bring the first 3G or 4G phone to market, and it did Time to get to the market The most valuable company in the world.

Despite the current backlog, Apple plays the long game. "It's about taking control of a very costly component that has a huge impact on system-level performance and user experience," says Blaber. "The proprietary development can optimize Apple, reduce costs and potentially increase margins." The in-house development, however, makes sense only as long as Apple continues to be one of the largest phone manufacturers in the world. The company can not underestimate how important it is to stay one step ahead in this vulnerable time.

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