Global Internet giant Amazon.com, Inc. (NASDAQ:AMZN) is in advanced talks to purchase the mobile chip unit of Texas Instruments, an Israeli newspaper Calcalist reported Monday. Amazon.com, Inc. (NASDAQ:AMZN) is already in the tablets business and planning to enter the smartphone industry. If the companies reach an agreement, Amazon will be in direct competition with Samsung and Apple. Both Apple and Samsung develop their own chips tweaked specifically for their own purposes. The chips for Amazon Kindle Fire are currently developed by Texas Instruments.
Last month, Texas Instruments said it is planning to shift its focus from smartphone industry to a broader market such as carmakers, where it would get stable and profitable business. TI did mention that it will continue to support its clients like Amazon, but won’t invest much to develop new technologies for tablets and smartphones. It’s primarily because there is fierce competition in the consumer mobile devices market, so manufacturers put pressure on the supply chain to cut prices. That keeps the margins of Texas Instruments razor thin.
Amazon’s Kindle Fire, powered by Android, was a huge success, and the company has done everything to repeat that success with its new Kindle Fire HD. Amazon has officially admitted that it doesn’t make any money from the sales of hardware. For over a quarter, there have been rumors of Amazon creating its own smartphone in collaboration with Foxconn.
We all know that Amazon has been successful in many businesses including Internet retailing and eBook business. Its tablets have also tasted success. But will Amazon.com, Inc. (NASDAQ:AMZN) be able to repeat that success in smartphone business as well? Especially when it will be competing with Apple iPhone, which has undeniably set the industry standards for smartphone technology? Only time will tell.
Coming back to the acquisition of mobile chip business, Gartner analyst Carolina Milanesi says she doubts if Amazon really wants to be so intimately involved in hardware.