Internet behemoth Amazon.com Inc. (NASDAQ: AMZN) is considering acquiring the smartphone chip division of Texas Instruments Inc. (NASDAQ: TXN). The report of the talks, which are said to be “advanced,” comes from an Israeli financial newspaper.

TI’s chips are used in Amazon’s Kindle Fire tablets and if such a deal is in fact in the works, the acquisition seems to indicate Amazon’s desire to become the master of its own fate, at least insofar as chip supplies are concerned. Both Apple Inc. (NASDAQ: AAPL) and Samsung Electronics currently design their own chips.

At the end of June, Amazon reported about $5 billion in cash and short-term investments, and an acquisition of TI’s smartphone chip business would surely eat up a good bit of that. Depending on the source of the data, Amazon is either losing money on every Kindle it sells or the company is breaking even. Either way, the getting into the business of designing and making chips is a very risky move. TI’s smartphone chips are based on a design from ARM Holdings PLC (NASDAQ: ARMH) and Amazon would have to continue to pay licensing fees to ARM.

TI has already said that it plans to get out of the smartphone chip business and focus instead on applications for clients like automakers. The company has also said it will continue to support customers of its mobile chip business, but that the company will not support further enhancements to tablets and smartphones.

Shares of Amazon are down 0.6% at $240.84 in the first half hour of trading this morning, in a 52-week range of $166.97 to $264.11.

Shares of Texas Instruments are up 3.7% at $28.29 in a 52-week range of $26.06 to $34.24.

Paul Ausick

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