Apple Inc.'s Peculiar Move Makes Sense

By Ashraf

Last year, Broadcom -- once viewed as a major contender in the cellular chip market announced its intention to shutter its efforts in cellular baseband/RF leading to the unfortunate laying off of about2000 of the 2500 former cellular engineers at Broadcom. Obviously the market for cellular chips is competitive so those highly skilled engineers likely would not stay unemployed for long (if at all).

While it wouldn't be a surprise to see ex-Broadcom baseband engineers and program managers wind up at the well-known cellular chip players, there is one place that many of those employees ended up that you might not associate with "cellular baseband."

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Welcome to CupertinoA while ago, Texas Instruments announced that it had "transferred" what remained of its wireless assets to Apple . This sparked speculation that Apple planned on developing its own connectivity chips, much to the detriment of Apple supplier Broadcom.

Following the Broadcom baseband exit, I've been keeping an eye on where some of the ex-Broadcom baseband personnel have turned up. If LinkedIn is a reliable guide, then it would seem that a good number of them are now at Apple working on projects that none of the employees dare mention in any real detail in said profiles.

I wonder what this person is working on? Source: LinkedIn.

However, I don't think it's much of a secret that cellular chip engineers are probably working on cellular chips.

Makes sense that Apple would want to do its own cellular chipsApple is one of the few major smartphone vendors that has not, as of yet, released its own cellular baseband. Samsung has its own in-house efforts, Huawei does, too. It's certainly the most profitable smartphone vendor that hasn't yet deployed an in-house baseband.

That said, while I think there's strong evidence to suggest that Apple is working on an in-house cellular chip solution, it's not clear what kind of timeline investors might be looking at for deployment. Cellular basebands and RF solutions are hard, and they're not only expensive to design well, but those solutions need to go through grueling carrier certification processes.

For a design like the Apple iPhone, which launches worldwide on a broad set of carriers, the challenges are clear. However, if the company is set on doing its own basebands in-house which I'd imagine is for cost-savings and/or integration into its A-series of applications processors then I think that given enough time and money it's possible.

One thing that seems a bit off The one thing that rubs me the wrong way about all of this is that, other than the Texas Instruments "technology transfer" back in 2013, Apple hasn't acquired a cellular baseband vendor just hired employees. While the employees certainly bring with them the "know how," they don't bring with them any prior hardware/software designs from which to build upon.

This means that, if Apple truly did staff up an in-house baseband team, it's starting "from scratch."

In that case, depending on how long Apple has been building these efforts, it may take years and billions of dollars invested before the first Apple cellular chips see deployment in a product family as important as the iPhone. Even then, there's no guarantee that Apple will be able to "catch up" with what the top merchant vendors are able to do.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple and LinkedIn. The Motley Fool owns shares of Apple and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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