Intel to buy Infineon wireless unit for $1.4bn to get into smartphone market

US CHIPMAKER Intel is to buy German chipmaker Infineon’s wireless unit for $1.4 billion (€1.1 billion) as it seeks to claw its way into the booming smartphone market, reducing its reliance on personal computers.

The move is the second major deal for Intel within two weeks. The company announced its $7.7 billion offer for McAfee on August 19th, its largest acquisition, bolstering the appeal of its chips as it tries to expand further into the mobile market.

“Infineon fills a strategic gap,” said Anand Chandrasekher, general manager of Intel’s Ultra Mobility Group. “As multiple devices proliferate around the planet, we cannot depend on one technology alone.”

Intel dominates the market for PC microprocessors. Its Atom mobile chips took the low-cost, no- frills netbook market by storm but are rarely found in smartphones.

Intel, which sold its chip business for mobile phones and handhelds to Marvell Technology for $600 million four years ago, faces pressure as Apple’s iPad and other tablet computers chip away at demand for notebooks and PCs.

While a shaky economic recovery may make families think twice about upgrading their computers, experts say future growth in the microchip industry lies in smartphones and tablets, areas that Intel is far from dominating.

Intel plans to keep Infineon’s mobile unit independent once the cash-transaction closes in the first quarter of 2011. “We have learned from our experience over the past 20 years that many of our previous acquisitions have not been as successful as we would have liked them to be,” said Arvind Sodhani, executive vice-president of Intel. “That’s why we are keeping this entity independent.”

UBS analyst Maynard Um said: “Intel’s acquisition of [the unit of] Infineon creates a well-funded industry competitor looking to compete and invest in the roadmap over the longer term.”

Mr Chandrasekher declined to say how much Intel had earmarked to invest in the business, saying only it planned to eventually become market leader in the mobile chip segment.

Meanwhile, rivals based on UK-listed ARM’s chip design – which is said to be more power-efficient than Intel’s offerings – continue to grab market share.

Infineon shares fell 3.7 per cent to €4.434, widening losses to Friday’s close after Intel warned its third-quarter revenue would fall short of its own expectations, due to weak consumer demand on personal computers. The deal will allow Infineon to focus on its core segments – automotive, industrial and chip card security. – (Reuters)