Why did Intel buy Infineon’s Wireless Business?
Intel, the world’s largest chipmaker, has announced that it would buy Infineon’s wireless business solutions group (WLS) for $1.4 billion in cash. WLS’s has annual revenues of ~$1.16 billion but ranks at No. 5 in the chipset industry, far behind sector giants Qualcomm, Texas Instruments and Broadcom.
There could be several reason to Intel acquiring the wireless business of Infineon some of them are listed below:
1. Reduced reliance on Personal Computers: The mobile business especially the smartphone business has been booming and it is important that Intel places some bets on the mobile and other handheld devices. Intel, which sold its chip business for mobile handhelds and cell phones to Marvell Technology for $600 million four years ago, faces pressure as Apple’s iPad and other tablet computers chip away at demand for notebooks and PCs. 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. There is a clear trend in Intel’s recent moves towards reducing its dependence on computers.
2. Relationships with top handset OEMs: Infineon has been supplying chips to most of the top handset vendors including Nokia, LG and Apple. This deal would give Intel a foothold into the mobile handset business and assured business as the chip set suppliers are normally long term partners for an OEM due to complexities in the manufacturing process.
3. Move to embrace LTE: Intel had earlier placed its bets on WiMax as a 4G technology but increasingly it is getting clear that LTE might turn out to be the technology of choice. Infineon’s acquisition can be an indication of shifting loyalties of Intel in favor of LTE. Intel has suffered several setback in the WiMax space including the write off of $1 billion investment in Clearwire. Already TD-LTE is emerging as an alternative to WiMax in the same spectrum band. In such a scenario, its acquisition of Infineon is not a surprise.
4. Access to Talent: Talent pool is always one of the important aspects of any acquisition and I am sure Intel will benefit a lot from the key talent at Infineon.
5. Interplay between PC and Wireless: Intel could potentially equip every PC with 3G which could accelerate its 3G volumes and directly challenge Qualcomm’s 3G dominance. This would result in blurring differences between PC and smartphones.
While the McAfee purchase has led to a certain amount of head-scratching from industry watchers and Intel investors who failed to see the synergy between Intel and a security software maker, the Infineon deal appears to be a better fit. I would request your views on the reasons for this deal.
The Infineon wireless acquisition is Intel’s strategy of getting back into the mobile phone chip business.
In 2006, Intel had sold its communications and application processor business to Marvell Technologies for $600 Mn. However, in July this year, Intel acquired
Comsys Mobile Communication and Signal Processing Ltd for $30 Mn. Intel also recently announced the roll out of its latest chipset – Atom, the 45nm Moorestown platform targeted for the smart phone and tablet market.
Post the Infineon wireless acquisition, Intel now has capabilities in wifi, 3G, 3.5G (HSPA+), WiMAX and most importantly LTE. Intel will also acquire Apple as a client. And an accelerating LTE product development program is definitely a key factor for this acquisition.
References:
URL: http://hotline.ccsinsight.com/article/Intel_exits_mobile_phone_processor_business
URL: http://www.eetindia.co.in/ART_8800611464_1800001_NT_b8de8b74.HTM
Infineon has had limited involvement in the development of the leading technologies that are unique to LTE/TD-LTE. Intel hardly acquired them as a way to develop LTE technology. What does make sense are the vendor relationships, market position including the overnight legend of wireless, Apple, and the ability to leverage 2G-3G with 4G developments. Intel also strengthens their hand in the earlier IPR base.
Some history appears to be needed:
WiMAX has been the renegade effort to develop a new stream of technology targeted at IP broadband communications. It started with the premise of using IP and Ethernet based protocols so that it extends and enhances developments in the IT/networking environments and pulls in the content and applications. Rather than use mobile, switched network fabrics it jumped to the ‘all IP’ flat network structure that LTE enables. When either WiMAX (Sprint-Clearwire EVDO+WiMAX) or LTE+3G are deployed, the IMS or IP to conventional mobile network gateways that each standard has implemented must be employed.
WiMAX has almost entirely been deployed as TDD-OFDMA. The IEE 802.16e standard allows for FDD and current chipsets support it, but since the spectrum available to alternative Greenfield operators has been TDD, FDD has not become widely used.
WiMAX and LTE share about 90% of their technologies in common. You might say that they are about ’180 degrees out of sync in business objectives’, questioning why the incumbent 2G-3G mobile industry would want to support a base of technology developed by a competitive group of companies. WiMAX, for its lack of incumbents, particularly those with the most useful spectrum and needed business momentum and funding, had developed widespread international support for R&D including from among the worlds leading mobile companies including Samsung, Huawei, ZTE, Motorola, Alcatel-Lucent, and Nokia-Siemens. A major reason why these companies pursued WiMAX was because of the technical merits of the technology. Every one of these companies also developed LTE and each has, perhaps shyly at first, said that they have benefited from the high degree of overlap. The experience helped lead them in commercial developments. What’s more, the patents developed while pursuing WiMAX apply directly to LTE.
The Apple led consortium acquisition of Nortel’s patents, particularly those developed while Nortel pursued development of WiMAX, before LTE was started, ties into the common nature of MIMO-OFDMA related patents. While LTE uses SC-FDMA on the uplink, that is a closely related OFDM derivative with many patents common.
Other areas of development include self-configuring, self-healing networks, SONs, Co-MIMO, MU-MIMO, and other advanced signaling and network topology methods that are now needed for LTE-Advanced and 802.16m/WiMAX 2 in order to achieve ‘true 4G’ performance requirements.
Why did Intel acquire Infineon? Infineon was getting squeezed between the dominance of Qualcomm, TI and increased competition that range from small WiMAX-LTE startups to relatively new Asian challengers that benefit from sponsorship of consortium of IPR holding companies including DoCoMo. Meanwhile, wireless is now broadband, increasing both the risks and opportunities for Intel. One may well ask the question, “As wireless becomes IP based broadband, how can Intel not take part?”
Before Intel got involved in IEEE 802.16 to a great extent and led formation of the WiMAX Forum, I talked with the CEO of Alvarion, Airspan and Redline, among the leaders in early development about the need to get them in the game. I told Alvarion’s CEO to ‘camp out on the front steps of Intel’s headquarters until they agree to get behind the then new 802.16 standard effort’. About four months later the group became founders of what was named WiMAX.
I told Intel that they needed to get involved because it was a ‘do or die’ decision to be involved in the emergence of the new field of technology from the early stages of development.
While acquisition of Infineon may look to some like Intel is playing catch-up in wireless, they are not aware of what else has developed. Intel hired and then acquired good people and good technology in leading areas including MIMO. Among the technologies implemented into 3GPP LTE are advanced methods of MIMO including collaborative and multiple user/device MIMO methods. Intel has pursued these for about 8 years now .. before they became popular with the ‘mainstream wireless’ industry. I talked with their department head, Minnie Ho, when this stuff was new thinking.. it is still perhaps is ‘just on the horizon’ but is now significantly well developed and incorporated in the advanced standards.
Intel has done extensive work in ‘advanced network architectures’ that are increasingly the way networks and devices will operate. Besides their own work, they have forged alliances, made acquisitions, and engaged in cross licensing and patent pools to broaden their capabilities and secure IPR defenses.
In many of these more advanced areas of technology, Infineon will play catch-up along with many other leaders in the traditional wireless industry. Why did Ericsson participate in the Apple acquisition of Nortel IPR? Probably not so much for 2G-3G wireless patents.
One of these days I hope to make an extended visit to India… I wish I had time to visit more than the routine tourist traps…