Why Tim Cook dropped $1 billion on Intel’s modem chips

3 min read
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Byers Market is a daily newsletter from NBC News senior media reporter Dylan Byers that takes you behind the scenes in Hollywood, Silicon Valley, New York and Washington.

Moving the Market: Tim Cook has signed a $1 billion deal to acquire Intel’s smartphone modem business, an investment that will give Apple greater control of its hardware production and ownership of crucial intellectual property.

• The deal also advances Apple’s pursuit of 5G connectivity, which will provide a boost to iPhone sales in the short-term and is essential to long-term growth.

The big picture: In-house production has always been fundamental to Apple’s success. “We believe that we need to own and control the primary technologies behind the products that we make,” Cook said in 2009, in what has since become known as “The Cook Doctrine.”

• By owning the smartphone modem unit, Apple can bring chip production into dialogue with software and design, rather than relying on a finished product from another company (specifically, Qualcomm).

• By making the iPhone modem more responsive to software and design, and vice versa, Apple will be able to further improve and differentiate its products.

Until then, Apple will continue to buy modem chips from Qualcomm as part of a six-year deal between the two companies. Qualcomm modems far outrank Intel’s in terms of speed and performance.

• But that relationship will likely end once Apple can create its own 5G chipsets — which probably can’t come soon enough for Cook, given his “frosty relationship” with Qualcomm chief Steve Mollenkopf.

What’s next: “Approximately 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases,” Apple said in a statement. “The transaction… is expected to close in the fourth quarter of 2019.”Big in the Bay, big in the Beltway: Chris Hughes, the Facebook co-founder who has fashioned himself as a leading voice of the anti-Facebook movement, has been meeting with regulators to lay out the case for breaking up Facebook.

• “In recent weeks, Mr. Hughes has joined two leading antitrust academics” — Scott Hemphill and Tim Wu — “in meetings with the Federal Trade Commission, the Justice Department and state attorneys general,” NYT’s Steve Lohr reports.

• “In those meetings, the three have laid out a potential antitrust case against Facebook,” arguing that it has made “‘serial defensive acquisitions’ to protect its dominant position in the market for social networks.”

The big picture: Hughes’ meetings with regulators drastically raise the stakes of his break-up-Facebook campaign, which began in May with a New York Times op-ed. He’s no longer just an anti-Facebook surrogate; he’s now a strategist.

• He even brings “a 39-page slide deck” to these meetings “that makes a point-by-point legal case for breaking up” the company, according to WaPo’s Elizabeth Dwoskin and Tony Romm.

The big question: What does Hughes want? Is he so troubled by Facebook and his small role in its creation that he feels compelled to undermine it, or is he hoping for something else: a role in the Elizabeth Warren campaign, a government leadership post, etc.?

• Dwoskin and Romm describe Hughes as “a former executive who believes he created something that is now harmful to society.” I’m not sure we should so readily accept the idea that that is his only motivation.

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