Intel's acquisition last week of chip maker Level One Communications represented a giant step by the processor manufacturer into the communications silicon business.
Valued at approximately $US2.2 billion, the stock-swap merger is the largest deal in Intel's history.
The chip-development expertise of Level One, a major supplier of components for enterprise networking and telecommunications equipment, could let Intel take a strong position in the communications components market.
"We want to be the leading supplier of communications silicon building blocks in the industry," said Mark Christensen, vice president and general manager of Intel's Network Communications Group.
Analysts said the acquisition is likely to be only the beginning of an assault on the networking chip market.
"Just having Level One's intellectual property is not enough," said Frank Dzubeck, president of Communications Network Architects, in Washington. Digital signal processors (DSPs), a key element of modems, network interface cards, and other communications devices, are not Level One's forte, he said. Lucent, Rockwell, and Texas Instruments now dominate the DSP market.
Intel recently announced an agreement with Analog Devices to develop DSPs.
Intel and Level One executives downplayed the possibility of integrating communications capabilities into Intel CPUs.
Level One will become a wholly owned subsidiary of Intel. The deal is expected to be completed this spring.