Intel Close to Buying Infineon’s Wireless Chip Biz

Intel (s INTC) has a contract to acquire the wireless division of German chip maker, Infineon, according to brokerage Rodman & Renshaw’s Ashok Kumar, who said so in a note to his clients today. Intel has been long rumored to be in talks with Infineon, and this is the first hint that the deal is progressing.

Intel has no option but to go after the smartphone business — widely recognized as the next major opportunity for the chip industry. The chipmaker, as I have said time and again, is a wireless laggard. With this rumored deal, it will only be trying to play catch-up with its rivals, especially Qualcomm (s QCOM), which many believe is one of the best-positioned mobile chip companies because it makes both the “brains” of smartphones and the radios. Right now, Intel only has the brains. In his note, Kumar sums it up well:

Qualcomm remains the best positioned company for the smartphone opportunity as it has requisite IP for all the major wireless interface standards in play. But there are several companies that are positioned poorly for the smartphone opportunity and are not likely to survive. Texas Instruments lacks baseband processors for future standards. Infineon is without application processors and Marvell has had only limited success to date. MediaTek remains strong at the low end.

Qualcomm has taken an early lead by becoming a major supplier to the Android ecosystem, especially to HTC. Qualcomm holds an equity stake in the fast-growing smartphone maker, and has become a major contributor (in terms of software) to the Android ecosystem. It has also been pushing the speed limits of its Snapdragon-based chipsets.

Kumar says that the company most likely to suffer is Broadcom (s BRCM), which he points out has been unable to develop compatible baseband modems and now has to fight off both Intel and Qualcomm. Broadcom, which wants to get 10 percent of the overall wireless chip business, “will continue to bleed money in the cell phone business and will likely exit after limited success,” Kumar notes. I am not sure I agree with him entirely.

In theory, Intel and Infineon together could challenge Qualcomm’s growing dominance. After all, Infineon has baseband chips (the radios) and the customer base, and Intel has the application processors. However, Intel has a history of botching up acquisitions and has proven time and again that it can’t look past its PC-centric DNA.

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