We recently evaluated Infineon’s industrial and automotive business and its wireline communications business. Let’s now take a quick look at its wireless communications business, which has been in the news for the past year due to the company’s presence in the iPhone.
Infineon’s cellular ICs include solutions for GSM/GPRS, EDGE and 3G/UMTS solutions. It has sought to leverage its strength in power management and system integration to design low-complexity, low-cost, high-performance chips. The company recently announced the latest additions to its single-chip X-GOLD family of cellular ICs. Infineon’s highly integrated power management features enable it to set industry-leading battery life standards. Its SMARTi transceivers for 2G and 3G are widely used by leading handset vendors.
Apart from cellular ICs, Infineon has a low, non-negligible 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. Finally, 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 in Europe and elsewhere, there are holes in its product portfolio. This is especially critical in the context of the global movement towards convergence devices. First, the company does not have an application processor family that complements its rich and highly competitive baseband solutions. Second, it does not have a complete set of mobile connectivity products. As Global Locate was 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 to 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 the phone’s cellular ICs were from Infineon, the application processor was from Samsung, WLAN from Marvell and Bluetooth from CSR. This model will work as long as handset vendors are interested in picking the best-in-class components from individual vendors. If, on the other hand, the trend drifts towards integrated single vendor solutions, the gaps in Infineon’s mobile portfolio will result in the company’s losing market share, potentially including iPhone designs for 2009 and beyond. Infineon will not be in a position to compete with 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 are viable paths for Infineon to stay competitive. In the sequel, we discuss potential acquisition areas and targets before looking at the company’s valuation.
This segment is a part in the series : Infineon