Talking about acquisitions, recruiting new players and poaching, Apple is fighting for baseband chips

Although the settlement with Qualcomm has secured Apple's supply of 5G baseband chips, Apple has never given up its efforts to develop its own baseband.

Intel's withdrawal has given Apple a good opportunity. After recruiting the head of Intel's 5G baseband chip at the beginning of the year, Apple has been keeping an eye on Intel's baseband business. Today, there is news that the $1 billion deal between the two parties has entered the final stage and may be announced next week.

Apple has not made any large-scale acquisitions in many years, but this time it made an exception for the baseband business. At the same time, Apple's efforts also include departmental restructuring and a "crazy recruitment" plan. A series of actions show that Apple is working hard to develop its own baseband.

Intel may split and sell the patents of its baseband business team

Today, multiple foreign media outlets, including the Wall Street Journal, reported that Apple is in high-level negotiations with Intel on the baseband chip business, and the two sides may reach a deal including employees and patents next week for more than $1 billion.

Rumors started as early as April this year when Qualcomm and Apple reached a settlement and Intel announced its withdrawal from the 5G baseband business. Other sources said that the two sides had started negotiations a year ago.

In the baseband business, Intel and Apple had a brief honeymoon period. In 2016, Qualcomm introduced Intel baseband chips. By 2018, due to the deterioration of the relationship between Apple and Qualcomm, Intel became Apple's only baseband chip supplier.

Thanks to Apple's big order, Intel can earn $2 billion in annual revenue from Apple's baseband business. More importantly, due to the iPhone's endorsement, operators and equipment manufacturers are seeking cooperation, which is something Intel has never experienced before.

But the good times did not last long. With Apple and Qualcomm reconciling in April this year, and Intel's unsuccessful progress in 5G baseband, Apple eventually returned to Qualcomm, which directly led to Intel's announcement of its withdrawal from the 5G baseband business.

Today, Intel's baseband business has become a department with an annual loss of US$1 billion, and seeking a sale should have been part of Intel's plan.

When asked by the media whether Intel was considering the 5G baseband business, Intel's new CEO Bob Swan said, "We are evaluating the best direction for intellectual property and employees." This seems to indicate that the 5G baseband business is not something that Intel cannot sell, but in the view of Bob Swan, who has a background in finance, he needs to seek the best way to sell it in order to maximize profits.

But from the current point of view, the previously rumored multi-billion dollar acquisition has become a billion dollars, and it is possible that Intel will adopt the method of selling personnel and patents separately. Because there have been recent news that Intel will conduct a wireless patent auction, including cellular patents and connection device patents. The former has about 6,000 patent assets related to 3G, 4G and 5G cellular standards, and another 1,700 assets that help realize wireless technology, and the latter consists of 500 patents.

For Apple, which is not short of money, talents and teams with experience in baseband chip design are more important. Earlier this year, Apple had already poached Umashankar Thyagarajan, former head of Intel's 5G baseband business, and now bought his original team. In addition to the previous experience of working with Apple in the baseband business, Intel's team should be the best baseband business target that Apple can currently find.

Apple launches self-developed baseband plan by recruiting new staff and poaching employees to integrate departments

It is no secret that Apple wants to control every core link of the supply chain, especially in recent years, including the iPhone's A series chips, GPU graphics card parts and other core components have gone through this process. The same is true for baseband chips. Apple does not want to be controlled by others. The lawsuit with Qualcomm was born in this context, but after all the trouble, it ended up signing a "6+2" long-term contract with Qualcomm.

This shows how difficult and high the threshold is for baseband research and development. Even companies as big as Intel and Apple are unable to develop their own basebands in a short period of time or even keep up with the mainstream. Apple said that it may not use its own baseband chips until 2025, which coincides with the "6+2" contract signed with Qualcomm this year, and Apple has also left itself a two-year buffer period.

Internally, Apple is actively implementing measures to strengthen its self-developed baseband chips. As mentioned above, in January this year, Apple hired Umashankar Thyagarajan, the former head of Intel's 5G baseband business. This "Antetokounmpo" not only played a key role in baseband chips during Apple's cooperation with Intel, but was also a senior executive of Intel's XMM8160 5G baseband project.

In addition, in February this year, Apple transferred its baseband chip team from the supply chain department to the internal hardware technology department. Under the unified leadership of another chip god Johny Srouji (who is responsible for the development of Apple's A series chips), this was seen by the outside world as Apple's landmark move from purchasing basebands from outside to developing its own basebands.

In April, Rubén Caballero, former head of Apple's baseband business, resigned. Some analysts said that the joining of "Antetokounmpo" and the adjustment of the department's structure may be the reasons for Rubén Caballero's resignation.

Rubén Caballero, former head of Apple's baseband business

According to Rubén Caballero's resume, he joined Apple in 2005 at the age of 50 and participated in the development of the first iPhone in 2007. All of Apple's 3G, LTE and other wireless network patents were applied for and submitted in his name, and he owns hundreds of patents.

In addition to the executive level where old people leave and new people come, Apple has also set its sights on Qualcomm's baseband chip R&D personnel. For example, Apple has announced plans to add 1,200 jobs in San Diego, where Qualcomm's headquarters is located, over the next three years. The vast majority of these jobs are related to baseband chips, and Apple has poached people right at the gate of Qualcomm.

Apple makes huge acquisition for baseband

Over the years, Apple has rarely invested large amounts of money in mergers and acquisitions, preferring to invest extensively in innovative companies with small and medium-sized funds.

Apple's largest deal to date was its $2.6 billion purchase of Beats Electronics and Beats Music in 2014. Last year, Apple acquired employees and patents from British chipmaker Dialog Semiconductor for $600 million.

If the deal with Intel goes through, it will be Apple's largest investment in recent years, and as mentioned above, it should be a good deal.

After reaching a settlement with Qualcomm, Apple has secured a stable supply of baseband chips, ensuring that it can launch its first 5G mobile phone in the second half of next year. However, compared with other mobile phone companies in the industry chain, it is already nearly a year behind.

In the analysis report of Tianfeng International analyst Ming-Chi Kuo, he said that Apple will use Qualcomm and Samsung's 5G baseband chips in 2020. Qualcomm's 5G baseband chips will be used in the millimeter wave 5G market, and Samsung's 5G baseband chips will be used in the market below 6GHz.

However, due to Qualcomm's strength in 5G baseband chips, there will inevitably be a comparison between the two, just like the 4G baseband chips that used Qualcomm and Intel as dual suppliers. In the previous lawsuit between Qualcomm and Apple, the trial documents showed that because Intel's baseband chip performance was different from Qualcomm's, Apple had asked Qualcomm to reduce the baseband chip performance parameters so as to "synchronize" with Intel. When the iPhone was launched on the market, it also attracted widespread doubts.

It is not known whether Samsung and Qualcomm's 5G baseband chips will have similar problems in the future, but Qualcomm is indeed too powerful in 5G baseband. Currently, Qualcomm's second-generation 5G baseband X55 has adopted a 7-nanometer process, while the 5G baseband launched by Samsung is still 10 nanometers. In the future, the technology and process evolution of baseband chips will become more and more difficult. Whether they can keep up with Qualcomm's pace will be a common pressure faced by baseband manufacturers.

But even so, Apple is determined not to put all its eggs in one basket.