Intel agreed to buy Infineon's wireless chipset unit for around $1.4 billion in cash, a move that strengthens its position in the fast-growing smartphone chip business.
The deal, which the companies expect to close sometime in the first quarter of 2011, and will give Intel a leg up as it seeks to further enmesh itself in the wireless market--which has long been dominated by companies building chipsets based on architecture from ARM Holdings. A deal between the Silicon Valley titan and the German chipmaker had been rumored for months, but chatter heated up late last week that an agreement was close to being finalized.
Infineon's wireless solutions unit raked in $1.13 billion in revenue in the 12 months that ended Sept. 30, representing about 30 percent of the firm's total revenue. The company makes baseband chips for Apple's (NASDAQ:AAPL) iPhone 4 and iPad, and also supplies chips for devices from Nokia (NYSE:NOK), Research In Motion (NASDAQ:RIMM) and others.
"We see this as a significant development in the cellular baseband market," said Stephen Entwistle, vice president of strategic technology at research firm Strategy Analytics. "Infineon brings top-10 handset OEM relationships and valuable cellular radio modem expertise."
Intel, for its part, has been steadily increasing its mobile presence. In May, the company unveiled a new Atom-based processor platform specifically aimed at the smartphone market. Intel recently also combined its Moblin Linux OS with Nokia's Maemo to form MeeGo. At least one product from Nokia running Intel's Moorestown chips and using MeeGo is expected by year-end.
Analysts said the deal with Infineon will help Intel--which has chip agreements with LG and Nokia-- muscle its way into the mobile market, but that it still has a lot of catching up to do. Although it is the world's largest chip maker, in mobile processors Intel has consistently trailed behind the likes of Qualcomm (NSYE:QCOM), Texas Instruments, Marvell and Nvidia, which use a low-powered architecture from ARM.
Report: Intel closing in on Infineon's wireless chip business
Rumor Mill: Intel nearing $1.4B deal for Infineon's mobile chip unit
Intel debuts new Atom platform for smartphone push
Intel brings Android to Atom smartphone processors
Chipset vendors' challenges multiply amid smartphone upheaval