Intel pays $1.4bn for Germany's Infineon

The silicon chip-maker Intel is making its second major acquisition in a fortnight in a bid to gain a foothold in the smartphone industry.

The company is buying the wireless semiconductor business of the German firm Infineon for $1.4bn in cash. The deal comes hard on the heels of Intel's $7.7bn offer for the security software firm McAfee, whose products it plans to adapt for sale with chip technology for mobile devices.

Infineon's chips are used in several of the world's best-known smartphones, including Apple's iPhone. Intel disposed of large parts of its wireless chip business in the middle of the last decade, but found itself at a strategic disadvantage as smartphones have increased in popularity and tablet computers based on similar technology have also entered the market.

Vijay Rakesh, an analyst at Sterne Agee, said the purchase from Infineon could be "a game-changer" for Intel.

"The acquisition provides an instant footprint and a platform offering for Intel to enter the emerging smartphone markets," he added. "Intel can now effectively diversify outside of the PC market, with captive customers Nokia, Apple and Samsung."

Intel declared yesterday that it intended to top the league of suppliers of chips for mobile devices, just as it already is for PCs. Infineon's wireless solutions division is currently about fifth in terms of market share.

"The acquisition strengthens the second pillar of our computing strategy – internet connectivity," said the Intel chief executive, Paul Otellini. "We are committed to positioning Intel to take advantage of the growth potential in every computing segment, from laptops to handhelds and beyond."

Infineon's shares fell 2 per cent as analysts expressed disappointment at the price Intel was willing to pay, and amid concerns about slowing demand for chips. Intel issued a profits warning last week, saying that consumer demand for PCs was slowing.