Apple confirmed Thursday that it will buy Intel’s smartphone modem division for $1 billion, adding more resources to the tech giant’s bid to build in-house the chips that power its iPhones.
The deal, expected to close by the end of this year, includes 2,200 former Intel employees as well as patents, equipment and leases. Although Apple agreed in April to resume buying phone chips from Qualcomm as part of a legal settlement, the purchase could fuel its longer-term ambitions for more control over the hardware that will connect its devices to the next generation of wireless service, 5G.
“We’ve worked with Intel for many years and know this team shares Apple’s passion for designing technologies that deliver the world’s best experiences for our users,” Johny Srouji, Apple’s senior vice president of hardware technologies, wrote in a statement. “[The incoming engineers], together with our significant acquisition of innovative IP, will help expedite our development on future products and allow Apple to further differentiate moving forward.”
Apple had previously tapped Intel to develop chips for its first 5G-enabled iPhones—then rumored to be on track for a late 2020 release—but reportedly later decided the company wouldn’t be able to supply them in time. Instead, Apple put to bed its yearslong dispute with its previous primary modem partner, Qualcomm, in a legal settlement that included a multiyear supply contract.
Intel announced hours after that April settlement that it would shelve its work towards a 5G phone modem, though the company said it would continue to develop 5G hardware for other devices. The Wall Street Journal reported on Monday that the division had been weighing on Intel’s bottom line with around $1 billion in annual losses.
“This agreement enables us to focus on developing technology for the 5G network while retaining critical intellectual property and modem technology that our team has created,” wrote Intel CEO Bob Swan in a statement on the sale. “We’re looking forward to putting our full effort into 5G where it most closely aligns with the needs of our global customer base, including network operators, telecommunications equipment manufacturers and cloud service providers.”
The ongoing rollout of new 5G networks is expected to eventually boost wireless speeds by 10-100 times, opening the door to a host of new connected device markets. Carriers began deploying 5G service in select parts of the country earlier this year, and every major Android manufacturer has plans to release a compatible phone by the end of the year, many of them also powered by Qualcomm.
While Apple will still likely use the 5G chips Qualcomm has already developed in at least its first 5G iPhones, the company has not revealed an updated release date.