With Infineon unit purchase, Intel buys its way back into smartphone game

Intel's $1.4 billion purchase of Infineon's wireless chip business gives the semiconductor giant an entry into the smartphone market, an area where the company has to be present.

The Intel-Infineon negotiations have reportedly been going on for months. Now that Intel has Infineon's Wireless Solutions (WLS) unit, the chip giant has the processors behind Apple's iPhone and entry-level Android devices. More importantly, Intel has a play in the ARM market. ARM architecture is what powers most smartphones and mobile devices. Intel's grand plan was to move its Atom to the smartphone, but that would require mobile device makers to use different architecture. The Infineon purchase gives Intel a bridge.

However, the real irony is that Intel already left the communications chip market once. In 2006, Intel unloaded its communications chip business to Marvell. At the time Intel said:

The planned sale will give Marvell a strong presence in the growing market segment for processors used in smart handheld devices. The sale also will enable Intel to focus its investments on its core businesses, including high-performance, low-power Intel Architecture-based processors and emerging technologies for mobile computing, including Wi-Fi and WiMAX broadband wireless technologies.

Oops.

Fast forward a little more than four years and Intel sees a burning need to get back into the smartphone game. Intel said in a statement:

Intel's goal is to expand its mobile and embedded product offerings to support additional customers and market segments, including smartphones, tablets, netbooks, notebooks and embedded computing devices. Through this effort, Intel will pair WLS' best-in-class cellular technology with its core strengths to enable the delivery of low-power, Intel-based platforms that combine its applications processor with an expanded portfolio of wireless options -- bringing together Intel's leadership in Wi-Fi and WiMAX with WLS' leadership in 2G and 3G, and a combined path to accelerate 4G LTE.

Simply put, Intel is back into the smartphone game---most likely for good. The Infineon deal is expected to close in the first quarter of 2011.