A new report suggests that Amazon is in advanced talks to buy Texas Instruments’ mobile chip business.
Texas Instruments makes the OMAP processor used by the Kindle Fire HD. Last month, Texas Instruments announced that it was looking to sell its mobile chip division because of falling revenues. TI has faced big competition from other ARM-licensees such as Samsung, Qualcomm and Nvidia and as a result the company is looking to get out of the mobile chip market so it can focus on other markets.
According to the Israeli newspaper Calcalist, Amazon is in advanced talks to buy TI’s mobile chip business in a deal that is expected to be priced in the billions of dollars.
As CNET points out, Amazon competitor Barnes and Noble also uses TI chips in its devices. It isn’t clear if Amazon would continue to sell it products to any other customer — but in the event a deal does take place, Amazon would likely have to continue to honor any existing contracts between TI and its customers.
Moving to a More Integrated Approach
So why would Amazon be interested in buying TI’s mobile chips unit? It all comes down to vertical integration. Like Apple, Amazon wants to have more control over its entire ecosystem.
In 2008, Apple acquired the chip maker P.A. Semi. This was actually a crucial acquisition for Apple, because it allowed Apple to build its own custom processors for the iPhone and iPad in-house.
The result is the AX series of chips that power the iPhone, iPad and iPod touch. By controlling the underlying hardware and the software stack, Apple can make its products more efficient.
If Amazon is serious about making hardware a big part of its business — having its own chip division would certainly give it a leg up against its competitors in the tablet space.
Reuters cites analysts who don’t see the full value proposition in a TI chip purchase — in part because lots of chip makers are losing money.
That may be true, but if Amazon does acquire TI’s mobile chip unit, it would be a longterm investment, not for a quick profit. Amazon would be betting that having a more tightly integrated ecosystem would increase its competitiveness against others in the market — and help streamline production efficiency.
Amazon did not respond to our request for comment.
What do you think of Amazon getting into the chip business? Let us know in the comments.