Intel going after iPhones and the smartphone market

If you cannot beat them, purchase them. At least that is what executives at Intel Corp. seem to be thinking.

Reports are circulating around the Internet that the powerhouse chip maker is close to finalizing a deal with German semiconductor company Infineon Technologies AG to purchase its wireless chip unit. If such a deal goes through, it would be a boon to Intel, which has struggled to get a footing in the lucrative smartphone market.

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“Infineon chips are used in smartphones from the iPhone to other popular phones,” stated Dan Olds, an analyst with The Gabriel Consulting Group. “The vast number of phones and now smartphones is driving a lot of chip sales, and Intel wants a piece of that pie. If Intel grabs Infineon, it will definitely have an impact on the market. With Intel’s size and reach, they can put the competitive screws to the other companies and drive margins down.”

On Monday, Infineon announced that executives have been in discussions with “interested parties” about its wireless chip unit. “A significant progress has been made within these discussions,” the company stated on its Web site, even though the names of the interested parties were not disclosed.

Talk in the blogosphere and in on-line media sites noted that Intel has not been the only company interested in Infineon’s wireless chip business. Reportedly Samsung Electronics Co. and Broadcom have also thrown their hats into the ring, though Intel is rumored to be the frontrunner.

Infineon is a hot commodity because of the widespread adoption of its chips in the smartphone market. The company’s wireless chip unit produces cellular baseband chips used by Apple for some of its iPhones and its new iPad. The chips are also used in some BlackBerries and Samsung and Nokia phones.

The hot smartphone market would be lucrative for any chip maker these days. Research company iSuppli Corp. estimates that next year Apple will be the second-largest semiconductor buyer in the world, so the company selling a huge chunk of smartphone chips to Apple could anticipate to be in an enviable position.

“From what I’m seeing, Intel has the inside track, and it looks to me like they are going to cut a deal,” Olds said. “I see this as a good move for Intel. It gives them a stronger mobile play and we know that this is a market that they have openly lusted after for years… Intel has had a hard time cracking the phone market because they could not get their heads around it. Their chips were too huge and power hungry and did not offer the same overall value as, say, ARM chips.”

However, Rob Enderle, an analyst with the Enderle Group, stated buying a piece of Infineon might be going down a road that has a few bumps.

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Intel going after iPhones and the smartphone market

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