https://www.theinformation.com/articles/apple-discusses-acquisition-of-intels-german-modem-unit
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What will happen to QCOM stock when Apple buys Intel 5G IP, in short term?
Intel forced out Munich executives and Engineers in 2016, id--ts.
Apple Discusses Acquisition of Intel’s German Modem Unit
By Aaron Tilley
Jun 11, 2019 3:37 PM PDT
Apple is in talks to buy a key part of Intel’s smartphone modem business—its German operations—in a deal that could boost the iPhone maker’s plans to internally develop a modem for its devices, according to four people briefed on the discussions.
The talks come as Intel considers selling its struggling modem business in pieces. Apple is focusing on one of the strongest pieces of the modem business. While Intel’s modem group is spread across the world, its foundation is in Germany, where the chip maker Infineon, whose modem operations Intel bought in 2011 for $1.4 billion, is based. Any deal with Intel for the business would likely send hundreds of modem engineers to Apple.
The Takeaway
• Apple in talks to acquire Intel’s German modem unit
• A deal could bolster Apple efforts to build its own iPhone modems
• Stefan Wolff, who previously managed Intel’s German modem unit, joined Apple recently
The discussions between the two companies, which have been ongoing since last year, could still fall through.
Many former senior executives at Intel, who came to the company through the Infineon deal, now work at Apple, including Bernd Adler, who joined Apple in 2015, and Stefan Wolff, who joined the iPhone maker a few months ago. Mr. Wolff previously managed the Germany-based modem operations for Intel.
Intel in April publicly announced its plans to exit the 5G modem business, saying that it saw little opportunity to turn a profit in the business. The announcement came hours after Apple, the biggest customer for Intel’s modem chips, said that it had settled a legal dispute with Intel’s biggest competitor in the cellular modem business, Qualcomm. As part of that settlement, Apple said it struck a multiyear agreement to buy modem chips from Qualcomm.
But, as The Information has previously reported, Apple has also been assembling an internal team with the goal of eventually building its own cellular modem, a technically daunting task that could take years to complete.
“We have hired outside advisers to help us assess strategic options for our wireless 5G phone business,” an Intel spokesman said in a statement. “We have created value both in our portfolio of wireless modem products and in our intellectual property. We have received significant interest in the business but have nothing more to say at this time.”
An Apple spokesman said the company doesn’t comment on “speculation.”
In April, the Wall Street Journal reported that Apple and Intel held discussions about a deal involving parts of Intel’s modem business starting last summer, but said the talks had halted. Apple’s continued interest in the German portion of Intel’s modem business hasn’t been reported previously.
Intel’s purchase of the Infineon modem unit brought more than 1,000 engineers to the chip giant’s mobile group, which ended up ballooning to around 7,000 employees spread across 32 global sites at one point, two people previously told The Information. But over time Intel struggled to manage such a large, fractured group—which also builds chips for Wi-Fi and other technologies, along with cellular modems. The group’s cellular modem group had difficulty keeping up with Qualcomm, the leader in cellular modems, on the latest technical advancements, resulting in delays that frustrated Apple.
Apple began using Intel modems in iPhones in 2016 as its relationship with Qualcomm deteriorated over the chipmaker’s licensing fees, a squabble that led to litigation between the two companies.
Any deal between Apple and Intel would likely include Intel patents and products, said one person briefed on the discussions. Such an arrangement would resemble the deal Apple reached with Dialog Semiconductor, a U.K.-based company that designs chips that handle power management chores in devices. Last year, Apple and Dialog struck a $600 million deal that brought 300 Dialog employees to Apple, along with some patents. At the time, Apple was moving to building its own power management chips and the deal gave Dialog a lifeline as it sought business outside of Apple.
Apple is determined to build its own cellular modems, part of a broader company effort over many years to reduce its reliance on outside suppliers for key components in its devices. But building cellular modems, which connect phones wirelessly to the internet, is an especially complicated and expensive effort.
Apple recently started hiring in San Diego, a hotbed for wireless chipmaking, where the company said it will hire 1,200 people over the next three years. A cellular modem from the company is likely many years away: Apple has told engineers interviewing for the team that it doesn’t expect to release devices containing its own modems until 2025, The Information has previously reported. The addition of Intel’s best modem engineers could help the company accelerate those efforts.