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Monday, August 02, 2010, 05:15 am PT (08:15 am ET)

Infineon deal would make Intel an iPhone component supplier

Intel is said to be close to a deal with Infineon's wireless chip unit, a purchase that would make Intel a major player in the smartphone market, and a component supplier for Apple's iPhone.

According to The Wall Street Journal, a deal between Intel and Infineon could be announced in a matter of days, with an asking price of $2 billion for the company's wireless chip division. Infineon makes the baseband chip found in Apple's iPhone.

Apple and Infineon have a strong partnership, in which the company is the sole baseband supplier for the iPhone, including the latest model, the iPhone 4. The company has supplied chipsets for the iPhone since it was first released in 2007.

Tension has existed between Apple and Intel since the iPhone maker opted to rely on ARM architecture for its smartphones. In 2008, Intel slammed the iPhone, claiming the device is not capable of accessing the "full Internet." Such functionality requires Intel-based architecture, the company said.

Apple has also entered into the chipmaking business, through key acquisitions of PA Semi for $278 million in 2008, and Intrinsity this year for $121 million. Those purchases set the stage for Apple to make its own custom A4 processor, based on the ARM architecture, found in the iPad and iPhone 4.

Intel has pushed its low-power, low-cost Atom processor for mobile devices, including smartphones, but the chips still cost more and use more power than their ARM competitors. The Atom was even pegged to be coming to Apple products in 2008, though it never came to be.