Nvidia Corp. (Nasdaq: NVDA)'s plans to acquire Icera Inc. make it the latest chipset vendor to combine the applications processor with the baseband processor. It's a relatively new trend in Central Processing Units (CPUs), but it may not be one that makes sense for every player in the red-hot space. (See Nvidia Targets Qualcomm With Icera Buy.)

"The market is signaling that it needs to have both capabilities in-house," says Heavy Reading analyst Gabriel Brown, citing Intel Corp. (Nasdaq: INTC)'s acquisition of Infineon Technologies AG (NYSE/Frankfurt: IFX), Broadcom Corp. (Nasdaq: BRCM)'s Beceem Communications Inc. purchase, and ST-Ericsson 's integrated chip business as examples. (See Intel’s Infineon Acquisition: All About 3G and Broadcom to Buy a 4G Strategy Via Beceem.)

"The interesting bit is how integrated does it need to be," he continues. "What is optimal?"

It's the difference between decoupling the innovation to two separate chips or locking them together. An example of the former approach comes from Texas Instruments Inc. (NYSE: TXN), which recently abandoned the baseband business to focus on apps processors. (See TI Shows Chips at MWC.)

Chip giant Qualcomm Inc. (Nasdaq: QCOM), on the other hand, is going for the greatest integration possible with apps, graphics and baseband technology, and that's paid off for them. But it's too early to tell if it will be a surefire combo for other chipset players too. (See Qualcomm, Nvidia Face Off in the Core.)

The first Long Term Evolution (LTE) devices, at least, use standalone baseband chips, and Brown says that will take longer to integrate into the apps processor.

"There's an argument that you want the best applications processor, but it's not necessarily the one that's integrated with basebands," he says. "How long that remains the case, I don't know."

And, as LR Mobile has said in the past, M&A moves and exits from the sector aren't likely to be over anytime soon. (See MWC 2011: Betting on the Next Chip M&A Deal.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile