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Infineon (Part 4): Wireless Strategy And Outlook

Posted on Sunday, Oct 4th 2009

By Guest Author Nalini Kumar Muppala

Infineon is in an enviable position with four of the top five handset makers as customers. Déjà vu? You recently heard it in this space in the context of ST-Ericsson. However, in addition to the above, Infineon also supplies to Apple and RIM – the two smartphone makers on a roll even in this year’s market turmoil. Sure, Infineon only provides a few parts to a just a few of the devices coming out of these vendors. But it has the reach to coax the big guns into buying exciting parts and solutions it can offer in the future. Infineon should leverage this reach.

Although the company does not have all the pieces, Infineon’s management understands the convergence trend. It is a concern that the road map does not show any signs of building a complete portfolio for convergence. Forming partnerships or JVs to fill the holes in its portfolio should be an important priority. The time is ripe for action on this front.

Infineon hopes to gain a lot by riding the trend to save costs using single-chip solutions. As The Economist points out, the industry has been driven for a long time to provide more capabilities at the same price. And Infineon notes that advances in technology have pushed costs low enough such that 50% of the world’s population now own a mobile phone. Further reductions in cosst will bring a phone within the reach of the still unserved. Infineon needs to cash on this renewed push to provide features at lower prices.

As mobile devices are the only mode of connectivity for many in developing countries, users would be inclined to use higher data rate services and once they get the taste of the value provided, will be inclined to upgrade – say from a GSM phone to a GPRS phone or from a GRPS phone to a low-cost 3G phone. Infineon is well positioned to ride this wave. It faces stiff competition from ST-Ericsson and MediaTek, which will likely lead to pricing pressures and lower margins.

A combined communication processor or a discrete baseband+application processor — whichever direction the industry takes, Infineon will have to depend on others to compete. We noted else where that Marvell is losing to Qualcomm at RIM. Infineon has to battle Marvell and Qualcomm to hold onto and increase the number of its design wins at RIM.

Although Near Field Communication (NFC) is still a nascent market, Infineon has strong presence in it. The company provides solutions to improve the security of transactions. This augurs well if the recent churning in machine-to-machine (M2M) space sees sustained uptake. With its expertise in power management and security, Infineon is positioned well in this area. However, recent moves by Qualcomm in the M2M space portend a tough competition.

With the company’s financial distress becoming less acute, increasing share at customers looks to be the priority, and the prospects are encouraging even if not outright rosy. It appears that Wireless Solutions will have to do a lot of the heavy lifting to pull Infineon out of its current slump, but it just might happen.

This segment is part 4 in the series : Infineon
1 2 3 4 5 6 7 8 9

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These games are no longer being played abroad.
Both Infineon and ST-Ericsson are based in Bangalore.
Infineon had started the ULC (Ultra Low Cost) mobile segment with talk of powering phones using AAA batteries. Sadly the model never saw the light of day.
Hopefully, a USP will evolve, otherwise it is just a game of cutting cost.

hephail Monday, October 5, 2009 at 11:09 AM PT

Hephail,

Sure, both Infineon and ST-Ericsson have operations in Bangalore. This is definitely part of the strategy to bring the costs down.

Semiconductor vendors such as Infineon play an important role in the evolution of devices being offered by top handset makers. By virtue of fierce competition and the wide playing field, this is more so in mobile phones, than say in computers.

It could be the market or handset vendor that drives innovation, but semiconductor supplier will continue to be the enabler and play an important role.

Nalini Kumar Muppala

Nalini Kumar Muppala Monday, October 5, 2009 at 8:22 PM PT