Intel’s Sale of Processor Unit to Have a ‘Minor’ Impact

The US$600 million deal disclosed by Intel to sell its mobile phone microprocessor unit to Marvell Technology Group may only have a ‘minor’ impact on the computer chip industry.

Intel was never able to grow its presence beyond mere applications processors for Personal Digital Assistants (PDAs).

Handset original equipment makers (OEMs) such as Nokia, Motorola, Samsung, LG Electronics, Sony Ericsson and Siemens are not likely to suffer much. However, this deal may be a “huge opportunity” for Marvell, as it gives Marvell access to Intel’s intellectual property (IP) in 3G and 3.5G technology.

Small Player

For many years Intel has been a relatively small player in a niche segment of the overall mobile phone processor business, and has had little penetration into base bands, and no penetration into the transceiver segment of the market. Both segments represent multi-billion dollar opportunities.

“The main problem for Intel’s mobile phone processor division was that it suffered from a lack of access to the Intel Group’s latest semiconductor processes. The purchase by Marvell will change this, which should give the product range a new lease on life,” said Stephen Entwistle, vice president of strategic technologies at Strategy Analytics, the Boston-based IT consultancy, which last week published a report on the deal.

Intel’s communications and application processor business develops processors for handheld devices including smartphones and personal digital assistants. The processors, based on Intel Xscale technology, include the Intel PXA9xx communications processor, code named “Hermon,” which powers Research In Motion’s Blackberry 8700 device.

The Intel PXA27x applications processor, code named “Bulverde,” is used in the Palm Treo smartphone, the Motorola Q and other devices.

Storage Comms

Marvell is considered by many to be a leader in the development of storage, communications and consumer silicon solutions. The company’s product portfolio includes switching, transceiver, communications controller, wireless and storage solutions that power the entire communications infrastructure, including enterprise, metro, home, and storage networking.

“Marvell has a good track record in the fabless chip business. It can supply high volume consumer chips profitably, despite aggressive price pressure,” said another analyst, Stuart Robinson, director of the handset component technologies service at Strategy Analytics. “Marvell now commands two ARM-based designs, its existing Feroceon and Intel’s XScale, giving it greater potential to penetrate the 3G handset market.”

The deal by Intel was characterized by analysts as startling. The sale will allow Intel to concentrate on its investments in its core businesses, including high-performance, low-power Intel architecture-based processors and emerging technologies for mobile computing, including WiFi and WiMax broadband wireless technologies.

The transaction is expected to close in approximately four to five months and is subject to regulatory review and other normal closing conditions, the companies said.

Many Jobs

Intel was, however, cheery in discussing the deal, and did not see the transaction in the same way that analysts did. The company’s communications and application processor business has approximately 1,400 employees. Most of Intel’s X-Scale employees will move to Marvell, the company said. The commute for most workers won’t be that much different, as both Intel and Marvell are located in Santa Clara, Calif.

“In recent years, Intel has made significant progress and won major customers with this business,” said Sean Maloney, Intel’s executive vice president and general manager, mobility group. “The communications and application processor segments continue to present an attractive market opportunity, and we believe this business and its assets are an optimal fit for Marvell.”

Marvell and Intel have worked together for six years, and that relationship inspired the deal, according to Dr. Sehat Sutardja, Marvell’s chairman, president and CEO. “This transaction presents Marvell with a tremendous opportunity to become a long-term leading supplier in the cell phone and consumer electronics market segments,” said Sutardja.

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