Amazon is reportedly mulling an acquisition of Texas Instruments' mobile chip business, in a bid to start in-house production of its own mobile processors and up its ante against competitors Apple and Google.
According to a report Monday from Reuters, Amazon and Texas Instruments are holding advanced talks of an acquisition, projected to be worth billions of dollars. Reports of the talks first surfaced from Israeli financial newspaper Calcalist.
The deal would extend an already existing relationship between the two companies, through which Texas Instruments provides its ARM-based OMAP processors for use in Amazon's new Kindle Fire tablets. It would also enable Amazon to adopt the same strategies as rivals Apple and Samsung, both of which independently produce the majority of their own hardware.
"With the trend towards more vertical integration, led by Apple, speculation that Amazon is interested in TI's chipset arm is unsurprising," Ben Wood, head of research at British wireless consultancy CCS Insight, told Reuters.
Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, also believes the deal would allow Amazon to adopt a more vertically focused strategy, a trend that's becoming more prevalent among big tech companies such as Microsoft, which recently unveiled Surface, its homegrown tablet PC.
"If Amazon wants to reach similar levels of vertical integration as Apple and Microsoft and Google, they need to be closer to a silicon provider," Moorhead told CRN in an emailed statement. "Given [Amazon's] long history with Texas instruments, a closer tie up could make sense."
Meanwhile, the deal could also be an attempt on Amazon's part to ensure Texas Instruments doesn't exit the tablet market altogether, Moorhead noted. The chip maker said in September it was considering re-focusing its efforts on industrial markets like automotive and transitioning out of the mobile arena, where it has struggled to keep a competitive edge against competitors Nvidia and Qualcomm.
"I think it is a bit of a stretch for an outright acquisition, but Amazon may have no choice given that Texas Instruments wanted to back out of the tablet space," Moorhead said.
Amazon and Texas Instruments did not immediately respond to a request for comment, but, according to Reuters, Amazon shares jumped 0.8 percent to $244.39 in pre-market trading, as reports of the acquisition came to light.
PUBLISHED OCT. 15, 2012