Intel and Apple are in “advanced talks” over the sale of Intel’s modem business, according to a report from The Wall Street Journal on Monday. A deal worth at least $1 billion could be reached next week.
Citing “people familiar with the matter," WSJ reported that the transaction would include “a portfolio of patents and staff valued at $1 billion or more.” The $1 billion lower bound would seem like a relatively small amount for a modem business that is likely generating at least $2 billion in revenue per year.
But WSJ noted that “a person familiar with its performance” said the smartphone operation had been losing over $1 billion annually; although, this could have referred to the period around 2013 when Intel was trying to get x86 SoCs into the Android smartphone space instead of just modems.
Intel has publicly admitted that its modem division gross margin is below its corporate average.
Another caveat for the $1 billion amount is that the sale might not represent all of Intel’s cellular modem business. When Intel announced that it would exit the smartphone 5G modem business, it left open the option to refocus the unit’s efforts towards 5G modems for PC and the Internet of Things. So far, it has not decided its final plans for the business.
For Apple, the sale would jumpstart its push to gain, as well as develop its own, modem intellectual property (IP), alongside modem talent. In March, Apple announced planning a 1,200 employee office in San Diego. But that appears to be a long-term effort, as the settlement with Qualcomm of Apple's licensing lawsuits involved a multi-year chipset supply agreement, (which was the cause for Intel’s exiting the modem space in the first place).
At the same time, Intel is also looking to sell a large amount of cellular patents and recently started exclusive talks with a potential buyer.