Intel to buy Infineon's wireless unit for $1.4 billion

World's largest chipmaker is buying Infineon's wireless unit as it seeks to boost its presence in smartphones.

Intel has agreed to acquire Infineon Technologies' Wireless Solutions business for approximately $1.4 billion, the companies announced late Sunday, as the world's largest chipmaker seeks to boost its presence in smartphones.

"The global demand for wireless solutions continues to grow at an extraordinary rate," Intel CEO Paul Otellini said in a statement. "The acquisition of Infineon's WLS (Wireless Solutions) business strengthens the second pillar of our computing strategy--Internet connectivity--and enables us to offer a portfolio of products that covers the full range of wireless options from Wi-Fi and 3G to WiMax and LTE (4G)."

Infineon ranked fourth in cellular-baseband shipments last year with a 10.7 percent unit share, according to a recent report from The Linley Group. Baseband chips enable wireless broadband, or 3G, on smartphones and tablets.

The Germany-based company is a major supplier to Apple, Nokia, Samsung, and others.

Intel said its goal is to expand mobile and embedded product offerings in the areas of smartphones, tablets, netbooks, notebooks and embedded computing devices. "Through this effort, Intel will pair WLS' best-in-class cellular technology with its core strengths to enable the delivery of low-power, Intel-based platforms that combine its applications processor with an expanded portfolio of wireless options," Intel said. An application processor is the main processor inside of a smartphone.

The chipmaker expects the wireless unit to remain a standalone business to support existing customers, including those with ARM-based products as well as Intel-based application processor platforms with 3G solutions.

The Intel-Infineon deal comes on the heels of Intel's announcement earlier this month that it would buy security software vendor McAfee for $7.68 billion. Intel also has a deal in the works to acquire the cable modem unit of Texas Instruments for an undisclosed sum.

So, where does this situate Intel-Infineon inside current popular smartphones? Teardown sites show that Infineon silicon plays an important role in the iPad and iPhone 4. UMB TechInsights shows two chips: an Infineon GSM/W-CDMA transceiver and a baseband processor.

Ironically, those are communication chips, the very business that Intel sold in 2006 to its Silicon Valley neighbor Marvell. So, Infineon would put Intel back in the game.

"Intel will be able to develop products that combine the application CPU and cellular baseband on a single chip, offer leading-edge 3G and 4G cellular technology, and add power-management and RF (radio frequency) components to its portfolio," Linley Gwennap, president and principal analyst of The Linley Group, said in a recent blog.

"The connectivity side remains a bit sketchy, but Intel now has solid FM and GPS technology and the capability to develop Wi-Fi and Bluetooth. The company needs this set of technologies to offer complete smartphone solutions that compete against Qualcomm's and ST-Ericsson's," he writes.

A requirement for any major smartphone chip supplier is to have not only the processor--referred to as an application processor--but also have a smorgasbord of connection options, such as 3G, 4G, Wi-Fi, GPS--for customers.

"Take the category of handhelds and draw a pyramid. Initial products will be aimed at the top end of that pyramid, which is the iPhone category where an integrated application processor isn't required. But to go down that pyramid into that feature phone where there's more and more (market) volume (and) you're going to have to have that level of integration," according to a source familiar with Intel's plans for Infineon silicon.

And this is a long-range plan. Intel is slated to bring out a smartphone-centric chip called Medfield by early next year that squeezes what is now two pieces of silicon into one chip, using Intel's most advanced 32-nanometer manufacturing technology. This will be the first step. After Intel gets the Medfield application processor into smartphones, then it will progress to further integration beyond Medfield.

The board of directors of Intel and the supervisory board and the management board of Infineon have approved the transaction, Intel said, adding that the deal is expected to close in the first quarter of 2011, subject to certain regulatory approvals and other customary closing conditions specified in the definitive agreement.

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