Back in April, Next Magazine (via Bloomberg) reported that Intel (NASDAQ:INTC) was in talks to buy VIA Technologies' smartphone chip business for $500 million, with the publication suggesting that there was an "80 percent chance" that such a transaction would go through.
Interestingly enough, about six months later, VIA Technologies announced (via DigiTimes) that it had sold some of its assets to Intel. This deal, per VIA, was apparently agreed to "at the end of July" and then completed on Sept. 30.
This transaction appears to have been very low-key. Why did Intel buy this asset? Although I can't know for sure, I believe that I have a good explanation. Read on.
This is probably for CDMA capability
Although Intel's cellular modems have steadily improved over the years, adding features and capabilities to help bring it closer to parity with mobile chip market leader Qualcomm (NASDAQ: QCOM), its modems have been missing a fundamental capability: CDMA EV-DO.
Major carriers such as Verizon and Sprint still use CDMA EV-DO as their 3G cellular technologies and will likely continue to do so for quite a while longer. Without support for CDMA EV-DO, I believe that Intel will have difficulty winning spots in smartphones sold in North America.
By buying VIA Telecom's mobile chip unit -- or at least the right assets of it -- Intel would get its hands on CDMA technology that it could potentially incorporate in future cellular modems. Such integration would likely improve the attractiveness of its stand-alone modems to potential customers like Apple (NASDAQ:AAPL), and it could bolster the competitiveness of future integrated applications processors and modems to other smartphone vendors.
How far out would CDMA integration in a future Intel modem be?
In order to get a sense of how far out a potential Intel modem with CDMA support would be, it's helpful to look at how long it took mobile chipmaker MediaTek to incorporate this technology into its chips.
DigiTimes first reported that MediaTek licensed CDMA2000 technology from VIA Telecom in early Oct. 2013. MediaTek then announced in early 2014 its plans to support CDMA2000 in chips that would begin sampling in the fourth quarter of 2014 and would be available commercially in the first half of 2015.
In other words, it was about a year-and-a-half from licensing agreement to commercial products.
If we assume a similar timetable for the incorporation of CDMA2000 into future Intel modems, then it would might sense to expect the company's modems to include support for this standard at some point in the first half of 2017; I'd call it late 2017 just to be "safe."
Intel inside of the Apple iPhone 8?
It doesn't look as though Intel would be able to incorporate CDMA2000 into a modem that could conceivably go into the next iPhone (i.e., the iPhone 7).
If Intel really executes in getting CDMA2000 integrated into a modem that begins sampling in late 2016 and is widely available in the first half of 2017, then Intel may have a shot at becoming a second source to Qualcomm for the iPhone 7s.
However, I think that -- if this acquisition of the VIA Telecom assets really is for CDMA -- Intel has a substantially better chance of winning cellular modem business in the iPhone 8.
It will be interesting to see if Intel comments on the reasoning behind the VIA Telecom asset acquisition during its Oct. 13 earnings call or at its investor meeting in November.
Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool owns shares of and recommends Apple and Qualcomm. The Motley Fool recommends Intel and Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.