Friday, June 27, 2008
[Originally for Sramana Mitra's site]
We have, so far in this series, reviewed Infineon’s financials, Qimonda and the industrial and automotive businesses. As we continue to dissect Infineon in our valuation analysis, we will now take a look at its wireline business.
Infineon’s play in wireline communications is based on the convergence of data, voice and video in a single network and the resulting demand for high quality electronics. The company offers broadband solutions for central office and customer premises equipment (CPE). The company’s product lines include xDSL, 2G/3G wireless infrastructure and Ethernet solutions.
According to Gartner, Infineon held the fourth position for application-specific wireline ICs in 2006, with 5.6% market share. The company was also fourth in the wireline access network IC segment with about 15% market share. The German chipmaker further strengthened its position by acquiring TI’s CPE business in the fourth quarter of 2007. Infineon hopes to leverage TI’s customer base and carrier deployments to become the ADSL market leader.
While Infineon is a leading player in wireline communications, competition and the market make it difficult for it to achieve disruptive growth here. As an example, for the company to sustain long term in the customer premises equipment market, it needs to watch out for disruptive technologies and applications that can be integrated into such equipment. Femtocells, or indoor base stations, are good examples. Another relevant but more ‘down the road’ example is the integration of a smart-energy gateway used to monitor and control customer site energy consumption.
In the next part of the series, we will look at Infineon’s wireless play, which complements its wireline communications business. As we will see, wireless is the growth driver Infineon is relying on.