Why did Intel buy Infineon’s Wireless Business?

Intel-InfineonIntel, 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.

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3 Comments on "Why did Intel buy Infineon’s Wireless Business?"

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Kiran Veigas
Member
5 years 10 months ago
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… Read more »
Robert Syputa
Member
4 years 11 months ago
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… Read more »
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