Merger Case Study: Apple Acquires Intel's Smartphone Modem Business

In 2019, Apple announced its decision to invest $1 billion to purchase most of Intel’s modem development unit.

The truth, however, is that this merger was years in the making, and will have implications on the connectivity, smartphone, and overall 5G landscape for years to come. Given the weight of the merger, it's worth taking a closer look at this classic merger case study.

What’s Apple’s Real Motivation for Merging with Intel?

On the surface, it could be easy to assume that Apple’s acquisition is merely a way to move into the modem business. On the contrary, Apple still hasn't started developing its own smartphone modems, as Qualcomm's patents are a major barrier to entry. In fact, Qualcomm is Apple's main modem provider. For example, for the iPhone 15, which releases in 2023,  Apple is leaning on Qualcomm to supply 100% of the 5G modems it needs.

Building its own modem is not a prime priority for Apple at this stage, as building mobile modem chips is an extremely complex business and Apple could be better off using existing modems from third parties who have spent years, if not decades, amassing expertise and knowhow in this space. 

So what's the return they are looking to secure on their investment?

From our vantage point, the primary motivators for Apple are:

• To gain influence within the 3rd Generation Partnership Project, more commonly referred to as 3GPP, the global standards organization that develops and enforces protocols within the mobile industry.
• To acquire Intel’s rich intellectual property portfolio.

This combination of influence and IP will enable Apple to trade and negotiate better deals for 5G royalties, notably with Qualcomm. Apple could also use some of Intel's key 5G patents to differentiate itself in the soon-to-be highly competitive 5G market.

How Did We Get to the Apple-Intel Merger?

The merger between Apple and Intel’s modem business started, ironically enough, with Intel’s own acquisition. In 2011, Intel spent $1.4 billion to acquire Infineon’s mobile modem business, along with its strong Research & Development (R&D) team. While the team held a number of standard-essential patents (SEPs) in 2G, 3G, and even LTE, Intel was not able to monetize the IP portfolio.

Now, Apple is betting that it will have better luck.

Here are some other key milestones that led to this transaction:

• 2012: Intel inherited Apple as a key customer for EDGE/HSPA iPhones, but not for LTE. When Apple moved to LTE in 2012, it dumped Infineon and Qualcomm became the sole LTE modem supplier for the iPhone.
• November 2014: Intel announced SOFIA SOC, an integrated Modem-App-Processor. Despite its potential, Intel failed to take it to the commercial market.
• 2016: Intel became the second LTE modem supplier for Apple’s mobile devices.
• 2018: Intel is chosen as the sole modem supplier for Apple’s new iPhone generations.
• May 2019: On the same day that Intel announced it will exit the mobile modem business, Apple announced that it will use a Qualcomm modem for 5G.

Stay Connected To Hear the Latest Case Studies Impacting 5G

Apple’s acquisition of Intel’s modem business is just the latest case study of companies strategically gearing up to take advantage of 5G. Apple will be able to put its stamp on the next evolution of the technology, while simultaneously putting itself in a better position to capitalize on the emerging landscape – both on the consumer and non-consumer side.

For more insights into the 5G ecosystem, markets, networks, and devices, sign up for an account with us today and gain access to free research from our global team analysts.