Interdigital: The Infineon Alliance

Thursday, December 27, 2007 | 1 comment

By Vijay Nagarajan, Guest Author

In the last article in this series, we took a brief look at Interdigital’s new 3G ASIC venture and the thought process behind these moves. In this piece, I wish to focus on the company’s alliance with Infineon, the German semiconductor company, whose latest claim to wireless fame is its presence at the heart of the iPhone.

The alliance with Infineon has been a rather crucial one for Interdigital. The companies have been working together on 3G technologies in a strategic relationship since 2001. Last year, there were two important pacts that strengthened this alliance –

• Infineon licensed its GSM/ GPRS/EDGE S-GOLD 3 baseband modem and protocol stack software from subsidiary Comneon to InterDigital. This essentially allowed Interdigital to produce its own chipsets with 2G and 3G baseband modems. The agreement gives Interdigital the right to use Infineon’s 2G technology in its own modem offering or to sublicense the technology to third parties developing their own 2G/3G modem offerings. This deal facilitated the company’s ASIC plans in the 3G space. Interdigital successfully conducted initial evaluation tests on this combined 2G/3G modem with a state-of-the-art HSDPA advanced receiver solution this month. While Interdigital continues its march towards the smartphone market, Infineon will benefit from the licensing of components of the modem, the complete design, and of course, the sale of ASICs.
• In January, the two companies expanded their relationship to incorporate HSDPA development as well. Under this expanded agreement, the companies will continue the joint development of the 3G protocol stack software technology for Infineon’s 3G platforms. This agreement expanded the collaboration to include the data-centric HSDPA as well. This agreement also “amends the per-unit royalty rates to be paid to InterDigital for the sale of Infineon’s ASICs containing jointly-developed protocol stack software.”

While the first agreement gives Interdigital a foothold in the highly competitive ASIC world, the second agreement is also fundamental for its future outlook. Here is why –

• Interdigital gets a share for every Infineon 3G chip sold world-wide
• Infineon’s 2G chipsets are in today’s phones, most notably the iPhone

So, if iPhone V2 which will arrive in 2008 has the Infineon chipset, then Interdigital will stand to make money from every iPhone sold world-wide. In the sequel, I will look at why this is likely to be the case.

This segment is part 3 in a 13 part series Inside the iPhone →
Jump to part: Visionary Beginning, Rocky Past, A strategic shift, The Infineon Alliance, Inside the iPhone, The Apple deal, A Qualcomm Acquisition Target?, Qualcomm Can Acquire, Valuation Roadblocks, Key Valuation Assumptions, Valuation, Risky Play with Huge Potential Upside, Interdigital, Consolidation?

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