Saturday, April 5, 2008
[Originally for Sramana Mitra's site]
In my recently completed series on Texas Instruments, I pointed out that TI was not in a great position as far as 3G is concerned. I subsequently also suggested that the company ally with InterDigital to prevent further damage. Let us take this a step further and examine what it will mean for TI to acquire InterDigital. I understand it takes much more than a 500 word essay to make an acquisition happen, but a quick look in this direction will give some new insights into the wireless industry as well.
If TI acquires InterDigital, it will have a viable path towards sustained 3G baseband market share. It will have a quicker time-to-market for advanced HSDPA products. An OMAP-Vox Solution with the 3G HSDPA baseband receiver from InterDigital and its own OMAP can be a competition killer. Even a bundle of IDCC’s SlimChip solution with OMAP will sell well. The new product can marry TI’s manufacturing excellence with the SlimChip’s proven performance. The interested reader can find a more detailed analysis on the combination product here in my blog.
InterDigital’s ASIC business is a small portion of its value. But for TI, the combination of 3G intellectual property (IP) and a competitive product is most appealing. In contrast to InterDigital, TI has never had an aggressive IP strategy. It has, however, leveraged its IP to obtain favorable cross-licensing deals with Qualcomm and the others. If it acquires InterDigital, TI can use its new-found IP position to further improve its margins by getting even better licensing deals. More importantly, it will have the handset vendors once again queuing at its gates for their next designs.
An acquisition will work well for TI. In the sequel, I will look at how the industry value chain will take it if TI made this strategic move to get InterDigital and also give some numbers for such a deal.
[Long IDCC, QCOM at the time of writing]