Mixed Feelings on Intel’s Infineon Purchase

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Along with giving it significant business in handsets, Wang and other analysts say this move will give Intel a head start in producing chips for other wireless devices.

"It's primarily targeting smartphones, but tablets, netbooks, laptop PCs will also work its way in there as well," Wang said. "You're going to see this kind of circuitry and more functionality built into laptops. You've got these people who pay for data over a wireless network and it becomes more important over time."

Others like the price Intel paid. Dunham Winoto, senior semiconductor analyst at Avian Securities, said Intel was expected to pay much more than it actually did.

"I thought it would be $1.5 billion to $2 billion on the low end," Winoto said. "They are getting this business at a good price. That could definitely offset some of the risks that comes with it."

Not everyone sees the move as a slam dunk. Tristin Gerra, analyst at Robert W. Baird, said the move is "too little, too late" for Intel to make its move into handset industry.

"Infineon's main customer is Apple. Well I think Infineon will lose Apple, which will go to Qualcomm. Furthermore, with Infineon, Intel is only getting 3G. They are going to have to develop 4G or Long Term Evolution internally. Plus there are problems with Infineon's processing architecture," Gerra said.

Winoto says while the acquisition comes with low risk because of the price, it still raises a number of questions. Intel has spent a lot of its time and money developing the Atom chip, which is aimed at the wireless device market.

"Where does this purchase leave Atom?" Winoto asked. "There's a possibility that Intel acquired Infineon for handsets and will use Atom for everything else. We'll have to see. I don't think it's a bad move, the ARM design which Infineon's chip use, has been proven to be the most energy efficient. But it raises questions."  

Analysts disagreed on whether or not this move would matter to Qualcomm, which is Intel's biggest competitor in the wireless chipset industry. While Wang said the move represented a clear warning shot and will make Qualcomm, "definitely nervous," Gerra disagreed.

"Qualcomm is the number one company in the cell phone chip market. They will be ahead in terms of Long Term Evolution integration with processor. They are not worried about it. This doesn't change the landscape. This move is better than nothing, but it won't have the impact that Intel would like," Gerra said.