Chipset maker Nvidia Corp. (Nasdaq: NVDA) announced plans Monday to acquire Icera Inc. , a privately held maker of baseband processors for 3G and 4G mobile devices, for US$367 million in cash. (See Nvidia to Buy Icera for $367M.)

The acquisition strengthens Nvidia's position in the mobile core, where it faces growing competition from Qualcomm Inc. (Nasdaq: QCOM), Marvell Technology Group Ltd. (Nasdaq: MRVL), Broadcom Corp. (Nasdaq: BRCM) and others. (See Qualcomm, Nvidia Face Off in the Core.)

The combination of Nvidia's applications processor and Icera's baseband processor means double the revenue opportunity in each device for Nvidia, according to the companies. UK-based Icera will also extend Nvidia's customer base as its chips are certified by 50 carriers across the globe.

The companies are promising their customers a faster time to market for mobile computing when the deal closes in about 30 days.

Why this matters
Buying up Icera should help Nvidia compete against Qualcomm, as well as other big names with integrated chipset capability, including ST-Ericsson , Samsung Corp. and Intel Corp. (Nasdaq: INTC) through its acquisiton of Infineon Technologies AG (NYSE/Frankfurt: IFX).

Nvidia was the first to market with faster dual-core Central Processing Units (CPUs), which are quickly becoming standard fare for more advanced smartphones. But chipset giant Qualcomm also owns an apps and baseband processor combo and is hot on Nvidia's trail with its 1.2GHz Snapdragon dual-core chip optimized for mobile efficiency. The move to buy Icera will help Nvidia to hold its own against Qualcomm and others.

LR Mobile included Icera on its watch list of chipset companies to be acquired as the space has gotten more competitive, citing its soft modem that supports Long Term Evolution (LTE) and HSPA as its main selling point. (See MWC 2011: Betting on the Next Chip M&A Deal.)

For more
Nvidia says the market for baseband processors is worth an estimated $15 billion per year. The big players are focusing on improving smartphone performance and growing through M&A. Here's more on how the market is shaping up.

• Intel’s Infineon Acquisition: All About 3G
• Broadcom to Buy a 4G Strategy Via Beceem
• Icera, Anite Test LTE Devices
• Chipping Away at LTE
• Challengers Shake Up LTE Chips
• Icera Demos LTE/HSPA Modem

— Sarah Reedy, Senior Reporter, Light Reading Mobile