Wireless Industry Analyst

Apart from the cellular ICs, Infineon has a low, non-negligible market share in the Bluetooth market. In collaboration with Global Locate (now Broadcom), Infineon also developed the Hammerhead II A-GPS solution for the cellular market. It also has a presence in the digital cordless and RF power markets.

While Infineon specializes in low-power chipsets and is looking to increase its wireless footprint across Europe and elsewhere, there are holes in its product portfolio. This is especially critical in the context of the global movement towards convergence devices. Firstly, the company does not have an application processor family that complements its rich and highly competitive baseband solutions. Secondly, it does not have a complete set of mobile connectivity products. With Global Locate getting acquired by Broadcom, Infineon’s future in GPS/A-GPS is unclear. Unlike the other leading cellular IC vendors, Infineon also does not have embedded WLAN solutions that will complete its current connectivity portfolio.

Infineon’s strategy seems to be to provide low-cost cellular platforms whose gaps can be filled by other vendors. The 2G iPhone platform is a good example. While its cellular ICs were from Infineon, the application processor was from Samsung, WLAN from Marvell and Bluetooth from CSR. This model will work fine as long as handset vendors are interested in picking the best-in-class components based on cost and performance. If, on the other hand, the trend drifts towards highly integrated single vendor solutions, the handicaps in Infineon’s mobile portfolio will result in the company losing its market share, potentially including iPhone designs 2009 and beyond. Infineon will not be in a position to compete with the likes of Qualcomm, Broadcom and STM, all of whom have a complete portfolio to build single-stop cellular platforms.

Given these loopholes in its mobile and wireless portfolio, mergers and acquisitions become viable paths for Infineon to stay competitive. In the sequel, we will discuss potential acquisition areas and targets before looking at its valuation.