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Analysis: Intel's wireless invasion not a sure win

Posted: 01 Sep 2010 ?? ?Print Version ?Bookmark and Share

Keywords:Intel? Infineon? wireless?

Intel Corp. and Infineon Technologies AG have agreed that Intel will acquire Infineon's wireless business for about $1.4 billion in cash. This makes Intel into the supplier of wireless transceivers to numerous cellphone manufacturers and for Apple's iPhone and iPad products. Infineon becomes 30 percent smaller than it was, and says that this will let it focus on automotive and industrial applications.

My view is that this deal that gives a Intel a $1.4 billion ticket to bet on itself in the convergence of communications and personal computingbut no guarantee of success. And it gives Infineon a cash booster but is perilous for the companyas one executive's restructuring can be another's deconstruction by a thousand cuts.

Regarding Intel, the company has shown itself poor at competing in any other major sector except PCs. Intel's dominance of the systems companies in the PC sector in the 1980s and 1990s, helped make up the minds of a lot of communications OEMs not to deal with Intel. This is Intel's second major tilt at the communications market place but there is not clear reason why the company should be any more successful this time around.

Intel launched itself at the handset market in the middle part of the decade using an applications processor based on an ARM architectural license. Intel found getting traction with customers outside the U.S. difficult and ended up selling the business to Marvell Technology Group Ltd in 2006.

How much has changed since Intel's last foray in to communications?

In 2006 Intel's Bulverde chip was aimed at smart phone and digital assistant applications on running 3G networks. Some might argue that Intel's Atom is now better suited to a coming wave of tablets and smarter phones on 4G-LTE and hybrid communications networks. But others would argue that Intel's rival ARM Holdings plc still has the high ground in low power consumption and that it is on better terms with multiple semiconductor vendors that can create application processors and RF chipsets.

One thing that has changed is that ARM-based processor designs have increased in significance and penetration. Indeed, Intel felt obliged to say in the announcement of the deal with Infineon that it would continue to supply wireless products that would support ARM-based product architectures. But that statement itself may make some handset companies re-evaluate their relationship with the Infineon wireless unit.

Intel's move begins to look like an admission that by turning its back on communications in 2006 the company got it wrong. The acquisition does give Intel the option to integrate digital and RF circuits and take a system-level view of requirements and partitioning. That, together with its leading-edge manufacturing engine, does give it some key advantages in the market, but it is not clear that these will be enough to transcend the suspicion Intel is regarded with by some in the communications sector.

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