Qualcomm dispute may have played role in Apple’s Intel deal: lawyers
Apple’s patent licensing dispute with Qualcomm may have been a contributing factor in Apple’s $1 billion acquisition of the majority of Intel’s smartphone modem business, lawyers have told WIPR.
In statements released yesterday, July 25, both companies said the deal, which is expected to close in the final quarter of 2019, will mean the transfer of Intel’s IP, equipment and leases to Apple.
Approximately 2,200 Intel employees will also join the iPhone maker.
Apple said it will acquire a number of patents for current and future wireless technology. Once the patents are combined with its existing portfolio, Apple will own more than 17,000 wireless technology patents.
The acquired patents will cover wireless technology, ranging from cellular standards to modem architecture and modem operation.
Intel will retain the ability to develop modems for non-smartphone applications, such as PCs, internet-of-things (IoT) devices and autonomous vehicles.
Matthew Howell, a partner at Haseltine Lake Kempner in Bristol, UK, said Apple’s acquisition “represents an attempt by Apple to reduce its reliance on external suppliers for a key component of future mobile devices”.
He added: “Apple only recently settled a major patent dispute with Qualcomm over patent licence fees for smartphone modems.
“It may be that the experience was so bruising for Apple that it decided it needed its own in-house capability for producing modems, particularly for future 5G enabled devices.”
The acquisition comes just months after WIPR reported that Qualcomm would collect at least $4.5 billion from its patent litigation settlement with Apple.
The two companies had been embroiled in a long-running dispute over microchip patent licensing, but under the terms of the settlement, Apple secured a six-year licence to Qualcomm’s standard-essential patents.
Howell said Apple’s latest move could be bad news for Qualcomm. “It looks likes its smartphone modem business from Apple will ultimately drop off, and without another major smartphone player to plug the gap, revenues could suffer,” he warned.
According to Howell, Apple’s acquisition of Intel’s smartphone modem business suggests that Intel believes it had sufficient opportunities outside of the smartphone space for its technology, in areas such as IoT and autonomous vehicles.
Jonathan Markham, a partner at Beck Greener in London, said the acquisition was unsurprising and that Apple’s relationship with Intel first began when it was forced to switch suppliers after its royalties dispute with Qualcomm.
Markham added: “However, even if that hadn’t happened, Apple's preference to be the master of its own destiny means that it would have been unlikely to stay with Qualcomm forever.
“So while the Qualcomm matter may have forced Apple’s hand with regard to timescale, this development would perhaps have been inevitable.”
Reaping the rewards
Looking to the future, Markham said the acquisition will most likely assist Apple in developing technology which is essential to wearable computing devices (such as smartwatches, smart glasses and smart headphones) which have mobile communication functions.
“The purchase of this portfolio is unlikely to reap rewards for Apple in the near term, and it will probably take a few years for Apple to catch up with Qualcomm's offerings,” Markham said.
He added: “However, the acquisition would appear to lay the groundwork for Apple's own proprietary integrated 5G modem technology in a few years’ time. When this eventually appears, it may cause Qualcomm some sleepless nights.”
Johny Srouji, Apple’s senior vice president of hardware technologies, said the smartphone maker was excited to have Intel’s engineers join its cellular technologies group.
“They, together with our significant acquisition of innovative IP, will help expedite our development on future products and allow Apple to further differentiate moving forward,” he said.
According to Intel’s CEO Bob Swan, the agreement enables Intel to focus on developing 5G network technology while retaining the critical IP and modem technology that it has created.
“We have long respected Apple and we’re confident they provide the right environment for this talented team and these important assets moving forward,” he concluded.
WIPR has contacted Qualcomm for comment.
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