Why Apple buying Intel's modem business is a big deal for the iPhone

It's finally happened. After months of speculation, Apple has confirmed its plans to buy Intel's smartphone modem business in a deal worth $1 billion. 

The acquisition, which hasn't been finalized, is Apple's second-largest in its history. (The record is still held by Beats, which Apple bought for $3 billion in 2014.) As part of the deal, Apple says more than 2,000 Intel employees will join its ranks. (Note that Apple is only acquiring Intel's smartphone modem business. The chipmaker, which abandoned its own 5G smartphone plans earlier this year, will still be able to make 5G chips for PCs and other devices.) 

Though not unexpected, the move is a pretty big deal for Apple, even if $1 billion is a relatively small sum for the company. That's because the acquisition has major implications for future iPhones.

It's all about a better iPhone 

Apple has made it clear for some time that it really, really wants to make its own iPhone modems, the same way it builds its own graphics processors. Acquiring Intel's chip business is the biggest step the company has taken toward that goal.

With the thousands of Intel employees also comes a huge cache of intellectual property, which Apple desperately needs if it's going to bring modem-making in house. After the acquisition, Apple will own more than 17,000 wireless technology patents, according to the company's press release. 

The acquisition also helps Apple better prepare for 5G. Analysts already expect the first 5G iPhones could launch as soon as 2020. These phones will, in all likelihood, feature Qualcomm chips, as Intel's 5G modems were reportedly delayed.

With complete control over one of the most important iPhone components, Apple will be able to improve its smartphone in new ways. 

But the Intel acquisition should vastly accelerate Apple's plans to build its own modems, which is good news for iPhone owners. With complete control over one of the most important iPhone components, Apple will be able to improve its smartphone in new ways. 

Consider Apple's A12 Bionic CPU: the chip powers some of the most advanced features in the iPhone XS and XR, like augmented reality and face-tracking features. Or Apple's H1 chip in its latest AirPods, which helps the earbuds sync better with your iPhone while getting a better battery life. The fact that Apple designs these in-house means it can ensure their hardware and software work better together. 

Similarly, an Apple-built modem could make for a faster iPhone or better battery life, as The Wall Street Journal points out.

These changes won't come overnight. Even with the acquisition, it will still take some time for Apple to get to the point where it can ditch Qualcomm altogether. But the end result will almost certainly be a better iPhone.

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