Apple in ‘advanced’ talks to purchase Intel’s 5G modem business

The deal reportedly sets a valuation of over $1 billion for the unit.

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Apple is reportedly deep in discussions with Intel over the potential sale of the chip maker's modem business. 

Sources familiar with the matter said the talks are in the "advanced" stages and a sale could easily reach the $1 billion mark or more, the Wall Street Journal reported on Monday.

The potential acquisition would include Intel's smartphone modem patent portfolio and members of staff associated with the business. 

The WSJ says that talks have been "on and off" for the past year, but after Apple reached a tense agreement with rival Qualcomm for a six-year chip supply at the end of a lengthy legal battle over license payments required for wireless technologies, discussions stopped in their tracks. 

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However, Intel has since received interest from other parties for the modem business, and it is this interest that prompted talks with Apple to continue. 

Intel announced its exit from the 5G modem smartphone chip market in April. The tech giant cited "no clear path to profitability [or] positive returns" as the reason for the decision. 

Apple had been earmarked as a potential purchaser of such chips, which could have been suitable for 5G-ready iPhones. While the processors were not expected to be commercially ready until 2020, Intel reportedly faced issues with battery life and heating through the development process. 

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There is still a chance that the talks will amount to nothing and could fall apart, and no buyout is guaranteed. However, should Apple acquire the business, this could be an important and strategic business decision. 

Intel's choice to bow out of the 5G modem chip market leaves Qualcomm as Apple's sole supplier of iPhone chips, and considering the two companies have already faced each other in the courtroom over licensing and component usage in the past, it may be that the iPhone and iPad maker does not want to be fully reliant on Qualcomm in the future. 

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The publication notes that by acquiring a set of patents and staff already associated with 5G chips and modems, this could save Apple potentially "years of development work." It is possible this team may end up as part of a new development setup in San Diego, in which engineers have already reportedly been hired by Apple. Up to 1,200 employees at the firm's new office are expected. 

So, how does Intel benefit? As the company has already scrapped plans to develop a 5G-worthy modem chip, offloading the unit to another business will reduce Intel's operational costs. 

An unnamed source said that Intel is losing $1 billion annually in the smartphone business at present, and this revenue could be better used in developing cloud and data-centric solutions as part of Intel's alternative plans to tap into the 5G space.

Intel and Apple will be announcing their latest earnings reports over the next week. 

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