Intel to pay $1.4bn for Infineon WLS
But does it really need it?
If the large baseband customers cannot be guaranteed to remain on-board, this must be about the ability for Intel to offer an integrated digital/RF platform, rather than just a standalone app processor. It has not done this since it sold off its XScale business, with integrated ARM processor and modem, to Marvell in 2006. Peter Clarke of EETimes commented: "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.
This suspicion stems from Intel‘s dictatorial stance in the early PC market. As Clarke put it: "This looks like a repeat of the Intel PC strategy where it took a system level view and started to tell OEMs: 'this is what your product looks like, this is the software, these are the components and pricing and this is the PCB layout'. And from there it was only a short step to telling OEMs what their margins were and how many of which types of product they should make each month."
And does Intel really need an integrated platform anyway, or its own baseband business, even one with an iPhone slot? Infineon already has one for low cost 3G and 2G, though many of its sales rely just on basebands, and of course mobile market leader Qualcomm follows the all-in-one approach. But others have increasingly moved away from modems. Intel certainly needs to improve its SoC activities, but it does not need to acquire a baseband firm in order to create integrated architectures around Atom – it could partner, as most of its mobile app processor rivals, like Texas Instruments, now do.
Intel failed in offering combined processor/baseband architectures before, and even previously giant vendors in this area, like TI and Freescale, have given up on the thankless margins and lack of differentiation to be found in modems (Nokia recently sold its own team to Renesas, while MediaTek continues to drive down the prices).
Samsung could overtake Intel in chips in 2014
Samsung could overtake Intel before 2015 and become the world‘s largest semiconductor vendor, with its mobile chips a key driver. This will put even more pressure on Intel to diversify its revenue streams and make a serious impact on the mobile and embedded devices market, though the acquisition of Infineon should improve its chances of staying ahead.
This is the view of analysts at IC Insights, who point out that Samsung‘s chip revenues have grown at a CAGR of 13.5 per cent between 1999 and 2009, while Intel‘s has slowed to 3.4 per cent in the same period. If the pattern continued, Samsung would overtake in 2014.
Intel‘s dominance has relied mainly on its microprocessors in PCs and servers, but it has had limited success in pushing its x86 architecture into mobile devices, which now represent the growth segment of the industry. Meanwhile, Samsung is larger in DRAM and NAND flash memory, where it is market leader, and is expanding its efforts and sales in many other areas that ride on mobile and embedded platforms – microcontrollers, microprocessors and wireless communication chips.
Although, in the past, it has not always won business with its own handset sister company, Samsung Mobile is now working more closely with the silicon arm and could be a vital lead customer in future – as in chips, Samsung is chasing the handset market leader, Nokia, aggressively and expanding its market share.
The main areas where Intel and Samsung clash are NAND flash and apps processors, both of which are growing on the back of growth in mobile gadgets. And Samsung has spent more on semiconductor capex than any chip vendor, including Intel, in six of the past seven years, says IC Insights. In particular, it has invested heavily in growing its ARM-based mobile processor business, whose flagship product is Hummingbird, and upgrading its foundry activities.
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