Saturday, June 28, 2008
[Originally for Sramana Mitra's site]
We recently evaluated Infineon’s industrial and automotive business and its wireline communications business. Let us now take a quick look at its wireless communications business that has been in the news for the past year due to the company’s presence in the iPhone.
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
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.