One of my readers pointed out that I have not discussed Infineon (IFX) in my iPhone and the Future series.
True. I somehow missed it, even though it very much featured on the list of component vendors. In fact, it looks like some analysts are predicting that Infineon’s iPhone design win will result in over $100 Million in revenues.
My entrepreneur friend writes:
I find your iPhone analysis always fascinating. One thing I found missing was your take on impact of iPhone on Infineon.
I will give you a brief history etc for Infineon. Infineon is a German chip company which recently split in 2 divisions: 1. Memory division which has been largely successful in the past providing DRAM chips. 2. Communication and Automotive division which has wireless, wire line and automotive chips.
The Wireless division of Infineon is a direct competitor of TI. Recently it made a strategic shift from providing the overall mobile chipsets to providing only RF and Modem chips (similar to TI, no Application Processors). This shift was driven mainly by insolvency of BenQ-Siemens Europe which was it’s primary customer.
Infineon has a strong RF business with customers like Nokia and Samsung but it’s Modem chips were not selling that much in the recent past. (It has solutions for all 2.xG, 3G and HSPDA stacks). After Siemens Mobile Phones, Infineon started aggressively pursuing other handset vendors just to stay in business. One such desperate attempts realized in the design win with Apple (NASDAQ:AAPL) iPhone (as the rumor goes). This may have changed the landscape at Infineon completely.
Infineon has also got recent design win with LG (NYSE:LPL) and strong rumors suggest that the LG’s iPhone competitor PRADA is also based on Infineon chips. There are rumors suggesting that now Infineon is getting traction at Nokia (NYSE:NOK) and Samsung as well where TI usually did well.
So I have a feeling that iPhone is going to be a new chapter in Infineon’s wireless strategy and business. Any thoughts from you on the matter would be very interesting for me indeed.
Well, my friend, you seem to have analyzed Infineon well. Indeed, if iPhone’s forecasts are on the mark [Business Week: Most analysts look for Apple to sell around 3 million units this year and 10 to 12 million in 2008, many figure that 20 million will move in 2009. Piper Jaffray Company analyst Gene Munster thinks Apple could sell more than 40 million iPhones in 2009—enough to lift revenues more than 30% that year, and earnings by 40%. If this is the case, then Infineon should benefit greatly from this design win.
Furthermore, if Verizon’s (NYSE:VZ) iPhone competitor bet is indeed going to be the LG Prada, then it is likely that phone could also move well, breathing a great deal more oxygen into Infineon that would be icing on the cake.
I am not so crazy about the Nokia situation, because it appears that they are getting into the low-end designs with Nokia. The money in that business will be in the higher end, and between the iPhone and the LG Prada, Infineon has two nice bets. If you extrapolate from the iPhone numbers, if iPhone generates $125M in 2007, $500M in 2008, $2 Billion in 2009 for Infineon, then you don’t need me to tell you that Infineon has got itself a golden goose!
Add on top of that the LG numbers, even if they are relatively modest, and you have most certainly put your fingers on a company that is a strong beneficiary of the iPhone movement.
Thank you for pointing this out!