3 rea­sons why Ap­ple would want to buy In­tel’s mo­bile mo­dem chip busi­ness (other than the iphone)

Other than the iphone, that is.

Macworld (USA) - - Contents - BY MICHAEL SIMON

The race to 5G just added a new lane. Fol­low­ing a re­port in the Wall Street Jour­nal ( go. mac­world.com/wsjn) in late July, Ap­ple an­nounced ( go.mac­world.com/byin) that it will be ac­quir­ing the ma­jor­ity of In­tel’s smart­phone mo­dem chip busi­ness,

which went belly-up ear­lier this year. The trans­ac­tion is val­ued at $1 bil­lion and is ex­pected to close in the fourth quar­ter of this year, Ap­ple said in a press re­lease ( go. mac­world.com/smbs).

In­tel­lec­tual prop­erty ex­chang­ing hands be­tween in­dus­try gi­ants isn’t ex­actly

earth-shat­ter­ing news, but this deal has sig­nif­i­cant ram­i­fi­ca­tions. Just three months ago, Ap­ple and In­tel were part­ners on the devel­op­ment of the iphone’s 5G mo­dem, but that abruptly ended in one fell swoop ( go.mac­world.com/exit) when Ap­ple and Qual­comm set­tled their long­time court case and In­tel “an­nounced its in­ten­tion to exit the 5G smart­phone mo­dem busi­ness and com­plete an as­sess­ment of the op­por­tu­ni­ties for 4G and 5G modems in PCS, in­ter­net of things de­vices and other data-cen­tric de­vices.”

That as­sess­ment ap­par­ently led to a sale, which in turn led to Ap­ple’s pur­chase. While it’s not en­tirely clear why In­tel de­cided to exit the mo­bile mo­dem busi­ness, con­ven­tional wis­dom sug­gests that its chip devel­op­ment hadn’t advanced far or fast enough.

So on the surface, it would seem like there’s noth­ing to buy, es­pe­cially for the pre­sumed price of a bil­lion-plus. But Ap­ple wouldn’t be buy­ing In­tel’s mo­dem scraps. Rather, it would be in­vest­ing in years of work (and patents) by one of the largest semi­con­duc­tor man­u­fac­tur­ers as it looks to de­velop an in-house 5G chip for fu­ture iphones that can ri­val Qual­comm’s. It’s not go­ing to hap­pen any­time soon, since Ap­ple and Qual­comm inked a six-year li­cens­ing agree­ment with a multi-year chipset deal in April, but Ap­ple’s play­ing a long game here.

But while the iphone is clearly the main im­pe­tus be­hind this deal, I don’t think Ap­ple’s mo­ti­va­tions are limited to the hand­set. 5G looks to im­pact ev­ery sec­tor of Ap­ple’s prod­uct lines, and ac­quir­ing In­tel’s smart­phone mo­dem chip busi­ness—even un­fin­ished—could have far-reach­ing im­pli­ca­tions within both Ap­ple and the in­dus­try. Here are three ways the In­tel

pur­chase could se­ri­ously im­pact Ap­ple and the in­dus­try at large:

1. AP­PLE WATCH

Per­haps even more im­por­tant than the en­gi­neer­ing work would be the peo­ple be­hind the work. The Jour­nal’s re­port spec­i­fies that in ad­di­tion to In­tel’s port­fo­lio of patents, Ap­ple would also be ac­quir­ing an infusion of tal­ent from the team re­spon­si­ble for the devel­op­ment of the chip. That alone could be worth bil­lions. It’s no se­cret that tech companies’ most prized assets are the en­gi­neers who work for them, and bring­ing a ready-made team of chip designers into Ap­ple Park for work on the A14 chip and be­yond would save Ap­ple years of hires and re­or­ga­ni­za­tion.

But it’s not the iphone that could stand to ben­e­fit the most from an in­te­grated 5G mo­dem. A more ef­fi­cient S chip, which pow­ers the Ap­ple Watch, is key to the fu­ture gen­er­a­tions of Ap­ple’s wear­able, es­pe­cially as power-hun­gry 5G ar­rives. With an in­te­grated 5G mo­dem, chips will be smaller and more power ef­fi­cient, two ar­eas of intense fo­cus for Ap­ple. As it stands, the mo­dem and main pro­ces­sor are sep­a­rate en­ti­ties and will con­tinue in the vein as long as it con­tin­ues to buy its modems from Qual­comm. In­te­gra­tion is one of In­tel’s strong­est suits, and it will be even more im­por­tant when 5G starts tak­ing off.

2. PATENT TROLLS

As 5G phones and de­vices pro­lif­er­ate over the next few years, there is also sure to be an uptick in law­suits. Ap­ple, Sam­sung, In­tel, and any other tech giant are all sus­cep­ti­ble to so-called patent trolls, companies that scoop up patents with the sole in­ten­tion of using them to sue other companies that may in­fringe on them. It’s im­pos­si­ble to say what patents are in­cluded in this deal, but you can bet that they would be used for friv­o­lous law­suits in the wrong hands. It’s prob­a­bly not the pri­mary mo­ti­va­tion for Ap­ple’s

pur­chase, but it wouldn’t be the first time some­one snatched up a bunch of patents to keep them out of the wrong hands.

3. THE NEXT MACBOOK

While Ap­ple has yet to re­lease a note­book with LTE con­nec­tiv­ity, that’s prob­a­bly go­ing to change with the ad­vent of 5G. It’s not just the speed—as ipa­dos gains more

Mac fea­tures, a new de­vice is likely on the hori­zon that sits be­tween the ipad Pro and Macbook Air. We don’t know what this de­vice would look like, but I’m will­ing to bet on two things: it will be pow­ered by an Ap­ple chip and it fea­ture 5G con­nec­tiv­ity.

We’re likely years away from such a de­vice, and I don’t think it’s a co­in­ci­dence that the re­ported In­tel deal and the retirement of the Macbook are co­in­cid­ing. Some­time within the next three to five years, I think we’re go­ing to see a brand­new de­vice from Ap­ple that solves two long­stand­ing prob­lems: the ipad’s in­abil­ity to re­place the Mac, and the Mac’s lack of a touch screen. With a 5G mo­dem, the next Macbook will be the ul­ti­mate road ma­chine, com­bin­ing the power of a Mac with the porta­bil­ity of the Mac in a thin and light pack­age, and In­tel’s mo­dem busi­ness could be the thing to get the ball rolling. ■

The iphone is im­por­tant, but it’s not the only rea­son why Ap­ple would want to buy In­tel’s smart­phone mo­dem chip busi­ness.

In­te­gra­tion will be key to the devel­op­ment of thin­ner, faster, and more power-ef­fi­cient chips.

New chips could make fu­ture Mac­books thin­ner, faster, and more power ef­fi­cient than ever.

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