Samsung, Intel in bidding war for Infineon

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RCR Unplugged recently reported that German chipmaker, Infineon Technologies, was under Intel’s acquisition microscope, but it seems another suitor – Samsung Electronics – has joined the fray.
Bloomberg reported Samsung’s interest on Wednesday, via a source at Citigroup. If true, events would pit two veritable chip giants against each other in a bidding war for Infineon Technologies AG’s mobile-phone business.

Infineon’s wireless business unit makes baseband processors, the chips that control the radio functions in phones. The firm boasts the likes of Apple, RIM, Nokia, Samsung and LG Electronics as its customers and the wireless unit is doing well for itself, with sales of $1.63 billion this year alone, an increase of 29%. Not too shabby. Infineon is also a major supplier of 2G/2.5G chipsets to Nokia and others. Selling the unit off, however, would likely bring in a significant chunk of change for the Infineon.
Citigroup reckons Samsung would be a better fit than Intel for Infineon, as it not only makes chips but also mobile phones, whereas Intel has yet to have any success in the smartphone market, even with its own chips. Samsung would also be able to use Infineon’s technology to broaden its chip business beyond memory according to Citigroup analyst Glen Yeung.
Will Strauss, analyst at Forward Concepts agrees Samsung could be an interesting buyer because the firm is already using Infineon RF transceivers in some of its handsets (paired with Broadcom basebands).
“The chip part of Samsung has been an ASIC licensee of Qualcomm, but that was probably for low-end CDMA-1x chipsets from a few years ago.  So they have some idea of what to expect in the baseband chip business,” he told Unplugged.
On the other hand, Strauss points out, Intel bought 3G/HSPA/LTE IPR (and some silicon design) from Nokia last year, but that probably did not include RF transceivers, since Nokia transferred 185 of mostly RF designers to STMicroelectronics in 2007.
In Samsung’s case (the #2 semiconductor supplier), it’ll help to someday pass Intel in semiconductor production.  In Intel’s case, it’ll satisfy the firm’s hunger (or vanity) for the cellphone business – and stave off Samsung’s bid for the #1 semiconductor spot said Strauss.
“Infineon is probably the major (and perhaps only) merchant-market source of 3G/HSPA+ RF transceiver chips (besides Qualcomm), and both companies covet that capability,” he said but admits Intel has the greater incentive.
“Intel wants back into the cellphone chip market, at whatever the cost,” Strauss told us. And why wouldn’t it? Mobile phones are selling at four times the rate of PCs, Intel’s core market.
The cost, however, may not be as high as one might think. Strauss points out that Nokia recently dumped its cellphone business(mostly the baseband design operations) to Renesas for a mere $200 million (and Nokia gets 1,100 bodies instantly off of its payroll).
“I think that sets the lower bound for an Infineon bid, but Infineon’s current financial picture is looking good, and they won’t sell on the cheap,” he mused.
At the end of the day, whoever wins it, Strauss believes the move is good for the industry. “Good for Infineon! There’s nothing like a bidding war that will hike the price,” he declared.