The $367 million acquisition bolsters Nvidia's position in the fast-growing baseband processor market.
Nvidia announced Monday it is acquiring Icera, a producer of baseband processors for 3G and 4G cellular phones and tablets, which will allow Nvidia to provide the two most used mobile chips on the market--applications and baseband processors.
The $367 million acquisition will help further Nvidia's position in the $15 billion-a-year baseband market--one of the fastest growing markets in the technology industry. It is the second largest purchase in Nvidia's history based on purchase price, behind Portal Player in 2006, Jeff Herbst, VP of business development at Nvidia, said in an interview.
"What this does is allows our customers to basically get a complete solution from us, it improves their time to market, and it really helps them advance the state of their products through the synergy both technical and otherwise that are embodied in this combination," Herbst said.
The purchase of Icera will enable Nvidia to provide both the application processor and baseband processor to OEM customers, which Nvidia expects will streamline operations and improve time to market. This essentially will help Nvidia double its revenue opportunity within each phone or tablet computer, Herbst said.
While Nvidia has no immediate plans to combine both processors onto a single integrated chip, Herbst said there are "no impediments" to doing so and Nvidia may pursue this possibility in the future.
Nvidia's acquisition is emblematic of the consolidating marketplace of mobile processors, an area in which Nvidia is playing catch-up, Jon Erensen, research director at Gartner, said in an InformationWeek interview.
"I think Nvidia was at the point where they had to invest if they are going to make this into a big business," Erensen said. "It follows a lot of consolidation in the market."
Nvidia's competitors are primarily Qualcomm, Intel, and Broadcom, which have been busy snatching up complementary businesses to offer comprehensive phone technologies, including application processors, RS, wireless connectivity (Bluetooth, Wi-Fi, and GPS), and chips that combine the technologies.
Herbst said Nvidia did not make the acquisition based on market influences from competitors, since Nvidia isn't missing out on any current opportunities. However, he did say that the acquisition signifies Nvidia's forward-thinking toward the future market environment.
"Over time though … this could become a bigger issue, in terms of delivering a complete solution when all independent baseband suppliers have been acquired by other applications processor companies," Herbst said. "There is a risk over the long term not being able to deliver a full solution if all baseband providers are owned by your competitors."
Herbst notes that Nvidia will still partner with some of its competitors, such as Qualcomm, and will continue to do so in the future as the market dictates.
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