Monday, August 30, 2010

What analysts say about Intel's Infineon wireless buy

Intel (INTC) and Infineon (IFNNY) announced today that Intel will buy Infineon's Wireless Solutions Business. According to Craig Berger CFA, CPA of FBR Capital Markets, Intel feels compelled to build out its mobile product suite, including ARM baseband processors for handsets, smartphones, tablets, and other mobile devices. This brings up the question of Intel and Samsung's competition for world chip domination, as noted by IC Insights. Will the buy strengthen Intel's ARM sales, knocking Samsung out of the sector, or will integration distract Intel, allowing Samsung to gain ground? In-Stat notes that, with all the push for SoC advances, the SoC industry will see contraction in the next 5 years.

The wireless chip business sale's main points:

  • Intel will pay about $1.4 billion cash for the unit
  • Infineon will concentrate future resources toward Automotive (ATV), Industrial & Multimarket (IMM) and Chip Card & Security (CCS)
  • WLS provides baseband processors, RF transceivers, power management integrated circuits (ICs), additional connectivity features, single-chip solutions as well as the corresponding system software
  • Intel plans to run the wireless chip provider as a stand-alone unit
  • Infineon's wireless customers include Nokia, Samsung, LG, and Apple, among others

Read all the acquisition details in Intel buying Infineon wireless business.

Berger points out that, for Intel, execution risks loom. Go beyond the core Intel Architecture CPU markets, and Intel can get distracted. Berger is going to "generally remain skeptical of Intel's ability to execute outside of core CPU market." If Intel fails to capitalize, Broadcom could benefit, scooping up some of the cellular-broadband market share left on the table.

On the positive side, Infineon's WSL is a well-executing, sizable presence in the cellular baseband market. Berger notes that Infineon's 65nm HSUPA platform (XMM 6160), upcoming 40nm HSPA platform (XMM 6260), and "decent" 4G LTE products are competitive in the semiconductor market. Not to mention, smartphones and tablet PCs are increasingly popular with consumers. Intel can defend its CPU market share as tablets ramp by offering the Infineon baseband, the power Atom applications processor, the WindRiver mobile operating system, and also on-system mobile security from its pending McAfee acquisition, Berger states.

As noted in recent analysis by IC Insights, Samsung to unseat Intel in chip sales in 4 years, Samsung has "crossed into Intel's turf by supplying ARM-based application processors that compete with Intel's Atom chips in smartphone designs." IC Insights expects Samsung to overtake Intel in chip sales. It is too soon to tell how Intel's acquisitions will bolster or burden the company in various semiconductor supply areas.

This is Intel’s third acquisition in as many weeks targeting technology for CE devices (The cable modem assets from Texas Instruments and the complete acquisition of security software vendor McAfee round it out). More than the products that will likely result from these acquisitions, these purchases clearly signal Intel’s intention to develop products for CE markets over the next 5 years, notes In-Stat. Acquiring these technologies means that Intel has more of the critical pieces required to develop SoCs for a broad variety of CE devices ranging from set-top and digital TV boxes to handsets and tablets. Now, Intel will be able to have multi-modal modem solutions integrated into Atom-based SoCs to support all the technologies throughout this crossover period where 2G, 3G, and 4G networks co-exist.

In-Stat also believes that the increased rate of hardware integration and competition will lead to future contraction in the number of high-end SoC vendors in the market over the next five years. Jim McGregor submitted these findings and is chief technology strategist at In-Stat.

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