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Apple finally acquires modem technology

by Sravan Kundojjala | 7月 29, 2019

Apple has finally made its move into baseband chip design by acquiring Intel’s 5G smartphone baseband division, having passed up the opportunity to buy several other baseband companies in recent years.

Apple already designs in-house apps processors, GPUs, flash memory controllers, power management ICs, Bluetooth LE ICs, fingerprint sensors and depth sensing sensors, so bringing modem design in-house is a logical next step. Intel’s 4G modem technology is already shipping in hundreds of millions of Apple devices, so buying Intel’s established business is a smarter move than spending billions of dollars developing legacy technologies organically.

Apple is likely to use Qualcomm’s 5G modems for at least the next two years, possibly three, as it will take Apple time to integrate Intel’s 5G modem technology into its existing A-series applications processors. We expect Apple to integrate Intel’s 4G IP into its A-series APs starting in 2021.

Intel has struggled to make money on its modem activities having invested $25 bn on mobile R&D and related acquisitions between 2011 and 2018, losing an estimated $16 bn during the same period. At its peak, Intel spent over $4 billion on mobile R&D annually.

Some strategic questions from the acquisition remain, including:

•    What scope is left for merchant baseband players in the shrinking addressable market?

•    If BBK (Oppo, vivo and OnePlus) and Xiaomi start to design their own processors, would Qualcomm still be able to compete?

•    Which other companies will benefit from Apple’s acquisition of Intel? TSMC (Apple’s foundry) and CEVA (Intel’s baseband IP supplier) are likely to be prime beneficiaries.

•    Should Qualcomm diversify from components into devices/systems?

Strategy Analytics estimates that Intel, Huawei/HiSilicon and Samsung together captured just over 30 percent unit share of the LTE baseband market in 2018, up from 8 percent in 2014.

In CY2018, the baseband market grew just 1 percent to $21.6 bn. 5G is the much needed catalyst for the market.

CY2018 Strategy Analytics Baseband

Vertical companies continue to gain share in basebands. By 2021/2022, the top 3 smartphone OEMs (Samsung, Huawei and Apple) will have reduced their dependency on Qualcomm dramatically, using their own baseband and apps processors instead. If that trend continues, then Qualcomm’s future may lie in devices rather than chips. Is it an opportunity for Qualcomm to become a devices company and introduce disruptive 5G devices using its own components?

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