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Apple buys Intel modem chip unit for $1 billion

Credit: Reuters Studio
Published on July 26, 2019 - Duration: 02:08s

Apple buys Intel modem chip unit for $1 billion

Apple took a major step toward supplying its own smartphone chips on Thursday with the $1 billion purchase of a majority of Intel's modem chip business.

Jane Lanhee Lee reports.

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Apple buys Intel modem chip unit for $1 billion

Apple took a major step toward supplying its own smartphone chips with the purchase of a of Intel's modem-chip business.

The deal, announced Thursday, is valued at $1 billion dollars.

It's Apple's biggest acquisition since it bought Beats Electronics for over $3 billion dollars in 2014.

22-hundred Intel employees will join Apple as part of the deal.

Reuters Stephen Nellis.

(SOUNDBITE) REUTERS CORRESPONDENT, STEPHEN NELLIS, SAYING: "A modem chip is a big part of what makes your smartphone smart.

Specifically it connects your phone to the Internet over wireless data networks like 3G 4G and 5G.

So it's a big component of the phone.

But Apple has always had to rely on outside companies to supply it.

Specifically for a long time it relied on Qualcomm.

Apple got into a huge legal fight with Qualcomm and over the past year or so actually turned to Intel to be its sole supplier.

Meanwhile some of Apple's biggest rivals like Huawei and Samsung have the ability to make their own modems so they don't have to rely on an outside firm like Qualcomm or Intel." Apple CEO Tim Cook has said in the past that the company wants to control the primary technologies behind the products it makes.

And as the telecom industry heads into the 5G roll out, the stakes are getting higher.

(SOUNDBITE) REUTERS CORRESPONDENT, STEPHEN NELLIS, SAYING: "These modem chips are very difficult to engineer and take years to come up with.

And Apple has a very aggressive goal.

One industry source tells me that Apple plans to use the 5G modem from Qualcomm for its 2020 phones but wants to have a working chip of its own as soon as 2021.

Now that might sound like a long time from now for regular folks but for the people in this industry they will tell you that's extremely ambitious and aggressive and Apple is probably looking to put those into assets to use to try to get there." Still Apple's relationship with Qualcomm won't end there.

Apple has a years long chip deal with Qualcomm, and one industry source told Reuters the iPhone maker is likely to continue using those chips in its flagship models even if it phases in its own chips for lower-end and older models.

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