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Analyst: Apple May Still Want Intel's Mobile Modem Business

While discussions of an acquisition have cooled since Apple’s deal with Qualcomm, there is still good reason to believe Apple would consider buying Intel’s smartphone modems, an industry analyst tells CRN.

Apple could still end up acquiring part of Intel's smartphone modem business despite a report that discussions between the two companies are on hold, an industry analyst told CRN.

Beginning last summer—and ending "around the time" of Apple's recent supply agreement with Qualcomm—Apple held talks about acquiring part of the smartphone modem business from Intel, according to a Wall Street Journal report Friday. Apple and Qualcomm have entered a six-year patent license agreement, as well as a multiyear chipset supply agreement.

[Related: Apple-Qualcomm Settlement Sets Stage For A 5G iPhone Next Year]

However, Intel may still seek to sell its modem chip business to Apple, the report said.

Patrick Moorhead, president and principal analyst at Moor Insights and Strategy, said it remains a possibility that Apple would be interested in a mobile modem deal with Intel even with its new agreement with Qualcomm.

"I believe that ultimately, Apple wants to develop its own modems to reduce its reliance on other companies, integrate into other devices and theoretically lower costs," Moorhead said in an email to CRN.

Apple is "actively trying to poach Qualcomm engineers in San Diego. It took Samsung and Huawei eight to 10 years to develop its modems to high-quality standards and they even own the carrier equipment, which makes it easier," Moorhead said. "Apple doesn't design carrier equipment, doesn't have eight to 10 years, but if they bought Intel's mobile modem, it could shave off a few years."

Intel declined to comment, and Apple did not immediately respond to a request for comment.

The Apple-Qualcomm agreement has included a one-time payment by Apple of an undisclosed amount to Qualcomm—estimated by a UBS analyst at between $5 billion and $6 billion.

Prior to the Apple-Qualcomm agreement, which ended all litigation between the two companies, evidence had been mounting that Apple wanted to develop its own iPhone modems.

A December report in The Information about a modem project within Apple was followed by a February report from Reuters, which indicated Apple had shifted modem engineering from its supply chain unit into its own hardware division.

Apple has a lengthy history of chip design, and "having more and more components under their own roof would make them more in charge of their own design destiny, timing and launches," said one executive at a solution provider partner of Apple, who asked to not be identified.

At the very least, Intel is pulling out of the 5G modem business following the Apple-Qualcomm deal. Intel's leaders are "assessing our options to realize the value we have created" in 5G modems, Intel CEO Bob Swan said in a previous statement.

According to reports, Intel had been the only 5G modem supplier for the 2020 iPhones but had missed upcoming deadlines this summer for delivering sample parts of its 5G modem. Fast Company reported earlier this month that Apple had "lost confidence in Intel to deliver the chip."

Previously, while Apple and Qualcomm were locked in their legal dispute, Apple began exclusively using Intel's cellular modems starting with the 2018 iPhone lineup.

Meanwhile, The Telegraph first reported that Intel's senior director on 5G, Umashankar Thyagarajan, had joined Apple as of February. Thyagarajan's LinkedIn profile lists him as working in "architecture" at Apple.

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