Apple’s Intel Modem Acquisition Its Latest Move in 5G Chess Match
Apple is buying Intel’s smartphone modem business for $1 billion. This move has been anticipated for the past couple of months and is significant for four reasons:
- This is another example of Apple wanting to own the technology behind the products that it makes. The vertical integration strategy yields greater control over product innovation and manufacturing.
- If successful, Apple would likely no longer use the industry-standard Qualcomm modem, and potentially gain a feature advantage (i.e. lower power usage) over the industry.
- Building this modem will be difficult. We expect the first Apple modem in mid-2022, two years after the expected debut of Apple’s first 5G phone in the fall of 2020.
- Starting in 2023 this could save Apple about $2B per year in licensing fees paid to Qualcomm (assuming royalty of approximately $8 per device), and increase Apple’s gross margin by just under 1% (38.1% to 38.8%).
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