Apple Inc. said Thursday it will buy Intel Corp.’s smartphone-modem chip business in a $1 billion deal, a move that would jump-start the iPhone maker’s push to take control of developing the critical components powering its devices.
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The deal, which covers a portfolio of patents and staff, is valued at $1 billion or more and is expected to close in the fourth quarter.
Intel will retain the ability to develop modems for non-smartphone applications, like PCs, internet-of-things devices and autonomous vehicles.
“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,” Intel CEO Bob Swan said.
Though the purchase price is a rounding error for companies valued in the hundreds of billions of dollars, the deal is important strategically and financially.
It gives the iPhone maker access to engineering work and talent behind Intel’s yearslong push to develop modem chips for the crucial next generation of wireless technology known as 5G, potentially saving years of development work. Apple has been developing chips to further differentiate its devices as smartphone sales plateau globally, squeezing the iPhone business that has long underpinned its profits. The company has hired engineers, including some from Intel, and announced plans for an office of 1,200 employees in San Diego.
The deal lets the company shed a business that had been weighing on its bottom line: The smartphone operation had been losing about $1 billion annually, a person familiar with its performance has said, and has generally failed to live up to expectations. Though it would exit the smartphone business, Intel aims to continue to work on 5G technology for other connected devices.
Apple and Intel have been in off- and on-again talks for about a year. Negotiations broke down around the time Apple reached a multiyear supply agreement for modems with Intel rival Qualcomm Inc., The Wall Street Journal reported in April.
Apple’s supply deal with Qualcomm was part of the resolution of a two-year legal fight between the companies over royalties Qualcomm collects for its wireless technology.
Dow Jones contributed to this story.