Chipmakers consolidate

IT LOOKS LIKE THE ANALYSTS were right. The recession is forcing the chip industry to consolidate with outfits trying to get bigger, either by buying other chipmakers or getting new technology to extend their reach into more market niches.

The latest firm to exhibit this trend has been Atheros, a California based company that makes computer chips for home networking devices.

It has bought Intellon, which makes adapters that enable you to connect gear to the Internet when a wireless Internet signal isn't available or a wired connection is required.

Intellon's technology allows you to connect one adapter to your wireless router via an Ethernet cable and plug the adapter into an electrical outlet. That sends the Internet signal through the electrical system in your house, allowing you to get Internet access from any electrical outlet by simply plugging another adapter into the outlet and connecting it via an Ethernet cable to your device.

Atheros is buying Intellon for $244 million in cash and stock.

By combining operations with Atheros, Intellon will be able to produce more chips and potentially bring down the cost of its powerline adapters.

At the same time, Atheros is protecting its future by having a guaranteed customer and can move into more niche products such as devices that combine the features of wired and wireless networking.

One of the predictions that analysts made when the industry fell into a slump was that chipmakers would consolidate and the smaller ones would have to either develop niche markets or die. So far it looks like the industry prophets were right. µ