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Monday, August 30, 2010, 05:55 am PT (08:55 am ET)

Intel to acquire iPhone chipmaker Infineon's wireless unit for $1.4B

Intel will increase its presence in the mobile phone market with the announced $1.4 billion acquisition of the wireless division of Infineon, a significant component supplier for Apple's iPhone.

Intel and Infineon announced Monday that they had agreed to the deal, in which Intel will own the wireless business of Germany's Infineon Technologies in exchange for $1.4 billion in cash. The deal pertains to a range of wireless technologies, including Wi-Fi, 3G, WiMAX and LTE.

Infineon makes the baseband chip found in the iPhone, and the company has had a strong partnership with Apple, supplying chipsets for Apple's smartphone since it was first released in 2007.

The relationship between Apple and Intel, however, has not been as rosy, as tension has stemmed from the fact that Apple opted to rely on ARM architecture for the iPhone and iPad. Intel has even publicly slammed the iPhone, stating that the device is not capable of accessing the "full Internet," and asserting that such functionality requires Intel-based architecture.

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.

On the other hand, 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.

A deal between the Intel and Infineon has been rumored for the last month, though previous reports had alleged the company's wireless chip division could go for a price as high as $2 billion.