Intel confirmed reports Thursday that it will sell its smartphone modem business to Apple for $1 billion, abandoning years of halting efforts to build its own wireless technology to capitalize on burgeoning modem technology.

And the chipmaker reported second-quarter sales well above its forecast, while modestly raising expectations for the year. The news sent Intel shares up 5.5% in after-hours trading.

Intel’s modems had been in the last few generations of Apple’s iPhone. But Apple announced plans to scuttle its smartphone modem business last April after Apple reached a legal settlement that called for using Qualcomm technology for the near future.

At that time, Intel said it would give up efforts to make its own smartphone modems for the new 5G wireless technology.

Apple was always seen as the logical buyer for Intel’s modem business, since Apple phones already used Intel technology and Apple is widely believed to be seeking technology to develop its own modems. Published reports in recent days correctly anticipated the $1 billion price tag.

“Approximately 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases,” the companies said in a written statement Thursday.

However, Intel CEO Bob Swan sent a note to employees saying only 70 percent of the workers in its communications device group have assignments with Intel or Apple going forward.

For the others, Swan said, “this is a difficult day.”

“I assure you we continue to pursue placement opportunities for the remaining employees both internally and externally,” he wrote in a note to employees.

Intel’s largest site is in Oregon, where the company makes its most advanced technology, but its modem business grew out of a wireless chip business in Germany it bought from Infineon nine years ago for $1.4 billion. Intel said modem employees transferring to Apple are in Germany, Austria, San Diego, India and at company headquarters in Santa Clara.

Intel went into last quarter facing severe headwinds as prices for memory chips fell, the Chinese economy cooled and sales to data centers slowed. The company is years behind in its forthcoming 10-nanometer microprocessor technology and was out of factory space for its current, 14nm chips – meaning it couldn’t deliver all the products its customers wanted.

At the time, Intel forecast 2019 sales would drop by 2.6%, to $69 billion. Intel raised that forecast slightly Thursday, to $69.5 billion, but warned investors that it expects revenues to fall 6% in the current quarter compared to the same period a year ago.

Intel has just begun a multibillion-dollar expansion of its D1X research facility in Hillsboro, the site where it crafts each new generation of microprocessor. Adding a third phase to the site will substantially increase capacity for Intel to makes its next generation of chip, which will require a huge new lithography tool.

With sales slowing, Intel shelved a similar expansion in Israel but said its Oregon plans remain on track.

Intel said Thursday its PC business performed better than expected. But sales in its highly profitable data center group were just $5 billion, down 10% from a year earlier.

Speaking on a conference call Thursday afternoon, Swan told investment analysts that trade uncertainty had prompted the company to ratchet back its sales outlook for the second half of 2019.

“Further tightening of export restrictions would come with revenue risk to our business," the CEO said.

On balance, though, investors saw Thursday’s announcements as good news. Shares climbed $2.84 after hours, to $55.

-- Mike Rogoway | twitter: @rogoway | 503-294-7699