Intel has its eye on iPhone, smartphone market

Computerworld - If you can't beat them, buy them. At least that's what executives at Intel seem to be thinking.

Reports are circulating around the Internet that the powerhouse chip maker is close to finalizing a deal with German semiconductor company Infineon Technologies AG to buy its wireless chip unit. If such a deal goes through, it would be a boon to Intel, which has struggled to get a footing in the lucrative smartphone market.

"Infineon chips are used in smartphones, from the iPhone to other popular phones," said Dan Olds, an analyst at Gabriel Consulting Group. "The vast number of phones and now smartphones is driving a lot of chip sales, and Intel wants a piece of that pie. If Intel grabs Infineon, it will definitely have an impact on the market. With Intel's size and reach, they can put the competitive screws to the other companies and drive margins down."

On Monday, Infineon announced that executives have been in discussions with "interested parties" about its wireless chip unit. "A significant progress has been made within these discussions," the company said on its Web site, although the names of the interested parties were not disclosed.

Talk in the blogosphere and on online media sites noted that Intel has not been the only company interested in Infineon's wireless chip business. Reportedly, Samsung Electronics and Broadcom have also thrown their hats into the ring, though Intel is rumored to be the front-runner.

Infineon is a hot commodity because of the widespread adoption of its chips in the smartphone market. The company's wireless chip unit produces cellular baseband chips used by Apple for some of its iPhones and its new iPad. The chips are also used in some BlackBerries and Samsung and Nokia phones.

The robust smartphone market would be lucrative for any chip maker these days. Research company iSuppli Corp. estimates that next year Apple will be the second-largest semiconductor buyer in the world, so the company selling a big chunk of smartphone chips to Apple could expect to be in an enviable position.

"From what I'm seeing, Intel has the inside track, and it looks to me like they're going to cut a deal," Olds said. "I see this as a good move for Intel. It gives them a stronger mobile play, and we know that this is a market that they've openly lusted after for years. Intel has had a hard time cracking the phone market because they couldn't get their heads around it. Their chips were too big and power-hungry and didn't offer the same overall value as, say, ARM chips."