Apple Inc took a big step toward supplying its own smart phone chips by purchasing most of the Intel Corp modem business in a deal worth $ 1 billion, the companies said Thursday.
Under the deal, about 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases. Combined with its existing portfolio, Apple will have 17,000 wireless technology patents, ranging from cellular communication standards to modems, making it a more powerful player in global licensing talks that will likely take place between major 5G patent holders such as Huawei Technologies Co Ltd.
Intel shares rose 5.7% to $55.05 after the news and the company’s report that its earnings beat analysts’ expectations. Apple shares edged up 0.1% to $207.29. After the agreement, Intel will reserve the right to develop modems for applications other than smartphones, such as personal computers, industrial equipment and self-driving cars.
Modem chips connect devices like the iPhone to wireless data networks, but Apple has always relied on outside suppliers for the part. Intel positioned itself as the sole source of iPhone modem chips over the past year after Apple got into a prolonged legal fight with previous supplier Qualcomm Inc over Qualcomm patent licensing practices.
Apple ‘s acquisitions have mostly been much smaller companies, making the Intel deal its second-largest ever after its $3.2 billion purchase of Beats Electronics in 2014. The deal with Intel will bolster Apple ‘s goal to make its own modem chip. Two of Apple ‘s biggest global rivals – Samsung Electronics Co Ltd and Huawei – already have the ability to self-supply modem chips.
Apple chief executive Tim Cook has also long said the company wants to control its own technological fate, what analysts have called the “Cook Doctrine.”
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