is in advanced talks to buy
's smartphone-modem chip business, according to people familiar with the matter, a move that would jump-start the iPhone maker's push to take control of developing the critical components powering its devices.
A deal covering a portfolio of patents and staff valued at $ 1
Though the purchase price is a rounding error for companies valued in the hundreds of billions of dollars, the transaction would be important strategically and financially.
It would give Apple access to engineering work and talent behind Intel's year-long push to develop modem chips for the crucial next generation of wireless technology known as 5G, potentially saving years of development work. Apple has been working on developing chips to further differentiate its devices as a global sales platform, squeezing the iPhone business that has long underpinned its profits. It has hired engineers, including some from Intel, and announced plans for an office of 1,200 employees in San Diego.
For Intel's part, a deal would allow the company to have a business that was weighing on its bottom line: The smartphone operation had been released about $ 1 billion annually, a person familiar with its performance has said, and has generally failed to live up to expectations. Thel it would exit the smartphone business, Intel plans to continue to work on 5G technology for other connected devices.
Intel and Apple have been in off-and-again talks for about a year. They broke down at the time Apple reached a multiyear supply agreement for modems with Intel rival
The Wall Street Journal reported in April
Intel had cast a wider net for buyers then and received expressions of interest from a number of parties but the talks with Apple, long seen as the most logical buyer, soon resumed.
Apple's supply deal with Qualcomm — the sole supplier of iPhone modems — was part of the resolution of a two-year legal fight between the companies on royalties Qualcomm collects for its wireless technology.
Intel had made inroads with Apple if that were done, but announced after the settlement that it was abandoning development or modems for 5G smartphones – an effort it had spent decade and billions of dollars on citing no clear path to profitability. Intel had bought its modem business in 2011 from
For $ 1.4 trillion
The Apple Intel discussions started last summer, around the time forms Intel Chief Executive Brian Krzanich resigned, people familiar with the matter have said. Krzanich championed the modem business and touted 5G technology as a big future revenue stream. When Bob Swan was named at that job in January, analysts said the odds of a deal rose because his focus on cleaning up would require addressing the losses in the modem business.
Intel is the latest Apple supplier to the business after the iPhone maker moved to develop components in-house. Last year, Apple agreed to a $ 600 million deal to acquire 300 engineers and facilities from
PLC as the company increasingly develops the battery-management chips Dialog had supplied.
Apple has been reluctant to cut big deals, preferring to acquire about 15 to 20 small companies annually that have technology it can easily integrate. But with the slowdown in its iPhone business, the company has become more open to bigger deals. It has been spending its cash reserves on share buybacks and dividends, but still has a substantial war chest, with $ 113 billion of cash after debt as of March 30. Its largest-ever deal remains the $ 3 billion acquisition of Beats Electronics LLC in 2014 Apple is set to report its fiscal third-quarter results next week. Intel's results are due later this week.
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