Intel steps closer to Infineon acquisition

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Popping up again like a recurring rash is the rumor that Intel is about to acquire German chip maker Infineon’s mobile chip business, a move which would significantly help the firm in its ARM wrestle for significance in the mobile/wireless space.
The first overture towards Infineon by Intel was reported in Financial Times Deutschland about two months ago, but sources say that offer was rebuffed. Since then, however, Infineon – who had hired investment banker JP Morgan to look into the monetary prospects of a sale – seems to have changed its mind, perhaps seeing a lucrative opportunity.
Indeed, the deal would be most profitable to Infineon, whose mobile chip business has been valued at between $1.1 and $1.4 billion. Last year alone, Infineon’s wireless unit managed to pull in some $1.13 billion in revenue, approximately 30% of Infineon’s total revenue.

German news source, Die Welt, also reported that the two firms had met numerous times over recent weeks, speculating that a deal could be imminent. “Now, it’s looking serious,” analyst Will Strauss from Forward Concepts told RCR Unplugged.
“First off, the rumored $1.4 billion is less than the almost $2 billion that  Intel paid for DSP Communication Inc. back in 1999,” Strauss told us, adding that was later divested along with the Xscale application processor to Marvell for $600 million – following an earlier write-down of $600 million on the DSPC acquisition.
“Intel realizes that cellphone is the only market big enough to rival the PC business,” he said. Indeed, Intel has been making every effort for the past couple of years to try and crack the mobile nut, with little success to date.
Intel is well known for its powerful X86 PC chips, but in the mobile space has yet been able to compete with the low power chips based on ARM’s architecture. Recently, however, the firm has been making strides in the right direction, bringing its Moorestown Atom chip down to significantly lower power.
“Unfortunately for Intel, Moorestown is still a bit of a pig though,” one industry insider told Unplugged confidentially.
Pig or not, it certainly is true that Intel has a hard time competing with the lean, mean chips from the likes of Qualcomm, Marvell, Texas Instruments and even Nvidia, who all use ARM’s cortex as a base.
“Acquisition of Infineon would get Intel instantly as a major force in the cellphone chip business, since Intel is the only supplier of baseband and RF transceivers in all iPhones to date,” Strauss mused. But, of course, he pointed out, “there is the looming Verizon version rumored for next January, which would have to use Qualcomm, since only QCOM has CDMA-1Xev-DO modems that Verizon will require (or even LTE/DO modems).  If that happens, the Qualcomm camel will have its nose under the tent for future iPhones.”
Another interesting twist could come from Intel’s partnership with Nokia, with both firms developing the open source MeeGo operating system for smartphones together.
Even though Nokia is divesting its baseband chip business to Renesas, says Strauss, Nokia will demand multiple sources for such chips and Intel could certainly be one of them after an Infineon acquisition.
“There is no other acquisition that would be as promising as this one for Intel, so I think it will go through,” he concluded.
Intel refused to comment on the rumor.