Infineon said Wednesday (Jan. 28) it will buy Hsinchu-based ADMtek Inc, a privately held fabless firm, for about $75 million. It will pay another $25 million “earn-out” bonus if certain performance targets are met during the next two years.

ADMtek mostly specializes in chips for Ethernet switches and network interface cards. It also has a smaller line of chips for wireless LAN and home gateway applications. The company booked revenue of about $45 million in 2003, far less than the $70 million some analysts had expected.

The German chipmaker is hoping to marry its experience with central office equipment to the system-integration knowledge that ADMtek has with broadband customer premise equipment. Of particular interest is ADMtek's in-house software development experience.

In the fiercely competitive markets for broadband systems, Infineon may gain an edge by offering the complete supply chain.

The acquisition is the company's first in Asia and is reminiscent of Cisco's buyout of consumer broadband router maker Linksys last year, where controlling the supply chain was also noted as a major incentive for the deal.

Infineon said it wants to place emphasis on further development of ADMtek's home gateway ICs as a means of increasing its business in the ADSL and Voice over Internet Protocol markets.

Citing figures from market researcher iSuppli, Infineon expects the market for xDSL products to grow at a compound annual growth rate of 12 percent from 2003 to 2007, hitting $1.2 billion.

It said ADSL chipset sales will be the biggest sub-segment, driven by sales of customer premise equipment.

By: DocMemory
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