Is Amazon negotiating to buy Texas Instruments's (TI) mobile chip operation? A new report says it is.

The report, from the Hebrew-language publication Calcalist, remains unconfirmed by either company, but it would mesh with TI’s recent announcement that it will concentrate on embedded platforms such as cars, and reduce its involvement in OMAP chips for smartphones and tablets.

Billions of Dollars

TI announced in late September that it would “reduce R&D expenditures” on the OMAP system-on-a-chip (SoC) used in a wide variety of tablets, including Amazon’s, and smartphones. Observers interpreted the announcement to mean that TI was leaving the mobile chip business, even as Intel has ramped up its investment in that market. The OMAP (Open Multimedia Applications Platform) chip was developed by TI.

The Calcalist report was authored by Assaf Gilad, who had been the first to report that Apple was interested in buying Anobit, a Israeli flash storage company. The technology giant did buy that company early this year, for about US$ 390 million.

If Amazon does buy TI’s chip business, it would gain greater control over the mobile destiny of its Kindle Fire tablets -- and for smartphones that it might be developing. Samsung Electronics makes its own mobile chips, and currently manufactures Apple’s mobile chips, mostly based on Apple designs. However, Apple and Samsung are engaged in a worldwide patent war, and there have been numerous reports that Apple intends to take its chip manufacturing business elsewhere.

On the other hand, the deal would likely cost Amazon billions of dollars for a stake in a highly competitive chip industry, where smaller chip makers are struggling. It would also turn the virtual retailer’s focus more toward hardware.

Nook’s Vulnerability

The competitors who could benefit from TI’s move include Samsung, which, according to some estimates, could reach a 50 percent share of the OMAP SoC application processor market if TI’s operation is sold. Other beneficiaries could include Qualcomm and Nvidia, which together represent as much as 35 percent of the market. TI’s share had been in the 15 to 20 percent range.

One big competitive question is how this might affect Intel, which has said it will ship a dual core, Atom-based SoC before 2013.

The other big competitor impact could be on Barnes & Noble, which uses TI chips for its Nook tablets and e-readers. At the very least, having the Nook’s processor brains dependent on the chip subsidiary of its key competitor could put Barnes & Noble in a weakened bargaining and strategic position -- and lead it to find another chip maker.