In-Stat Comments on Intel’s Acquisition of Infineon Wireless Business

In its efforts to complete the wireless puzzle, Intel announced that it has acquired the wireless assets from German semiconductor vendor Infineon, a group Intel has partnered with in mobile solutions for several years. With the acquisition, Intel acquires roughly 3,400 staff, the existing cellular modem business, as well as the research investment in future products, including 4G (LTE) modem technology. This is another piece of valuable intellectual property that can be integrated or included in a silicon solution for consumer electronics (CE) products. This is Intel’s third acquisition in as many weeks targeting technology for CE devices that also includes the cable modem assets from Texas Instruments and the complete acquisition of security software vendor McAfee. 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 five years.

With the transition to highly integrated silicon solutions, known as systems-on-chip (SoCs), for everything from handsets to PCs, each of the individual building blocks that were once separate chips becomes a critical building block in current and future solutions. What was once just a processor is now a multi-core processor, graphics processing unit (GPU), video encoder/decoder, audio processor, memory controller, I/O interface, and even a radio frequency (RF) modem. Intel, like other companies in the processor segment, has to rely on developing, acquiring, or licensing all the critical building blocks. Internal development and acquisition is typically preferred to ensure the timing of development efforts and interoperability of the individual components. So, 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.

The acquisition of the cellular modem technology from Infineon is particularly important for Intel. Intel has struggled to develop solutions to compete with ARM-based processors in the market for the high-end mobile devices like smartphones and tablets. However, a critical part of Intel’s strategy still relies on Moore’s Law, the doubling of transistors on the same area of silicon every 18 to 24 months. As the manufacturing technology shrinks the silicon designs, the Intel processor cores, GPU cores, and other silicon building blocks will become more competitive. In addition, Intel will be able to integrate more onto a single chip. Currently, only Qualcomm integrates the cellular modem for mobile devices. This also opens up many opportunities in the embedded market, which is currently working to connect our world through the devices we employ in our daily lives, but the embedded market does not present the same barriers to entry as the mobile CE market. In addition, it is very important to have second and third (2G & 3G) cellular technology because these networks are still growing and will be the primary revenue and profit drivers for wireless carriers around the globe throughout this decade. Despite the hype about the fourth generation (4G) technologies, the industry will not shift quickly from one generation to the next. 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.

With the acquisition , Intel also acquires greater links to the ARM community. The Infineon wireless modems use ARM cores, and many of the customers using ARM SoCs in smartphones, such as Apple, are using Infineon baseband modems. Intel was developing processors based on ARM technology before selling the group to Marvell in 2006, but Intel still retains one of the few ARM architecture licenses in the industry, at least for some of the older ARM technologies. This acquisition may help bridge the gap to some of the customers and applications in which Intel has struggled in the past. However, In-Stat believes that just having this technology does not guarantee success. There are still many hurdles to overcome, especially when Intel is not the incumbent technology provider. But, with some very compelling technology, significant financial and engineering resources, and a management and shareholder requirement to break into new markets for future growth, Intel will be a fierce competitor and will likely succeed in some of its endeavors. 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. Intel is positioning itself well to succeed in this changing environment.

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