UPDATE 2-Silicon Labs to sell unit to Skyworks for $2.75 bln, shares surge after hours

(Adds context, CEO quotes on strategy change)

By Stephen Nellis

April 22 (Reuters) - Silicon Laboratories Inc said on Thursday it would sell its infrastructure and automotive business to Skyworks Solutions Inc for $2.75 billion, in a move that would let the chipmaker focus on its core business of wireless chips for smart home gear.

Shares of Silicon Labs jumped 15% to $166.4 in after hours trading, while shares of Irvine, California-based Skyworks were up 4.7% at $192. The deal includes Silicon Labs' power and isolation chips used in electric cars, among other products, as well as all the intellectual property and associated employees for the products, the company said in a statement.

Austin, Texas-based Silicon Labs has been in recent years focused on the internet-of-things (IoT) market, selling wireless chips for smart home devices. Those devices use a smattering of different radio communications protocols, and Silicon Labs has won deals with gadget makers by packing those different standards into a single chip that can be used to work with smart-home networks from Alphabet Inc's Google and Amazon.com.

Silicon Labs Chief Executive Tyson Tuttle told Reuters that IoT chips make up about 60% of the company's business, with revenue growing at more than 20% per year. But the IoT products have different customer bases and supply chains than the company's automotive and infrastructure businesses.

"If you look at what we're doing in IoT, it's more than just about the silicon - it's also about the software, the wireless connectivity, the broad range of applications in the platform that we're developing," Tuttle said. "That requires focus and clarity to be able to really optimize."

Silicon Labs expects to receive $2.3 billion in net proceeds from the deal and will return about $2 billion to shareholders through a combination of special dividends and buybacks.

The deal is expected to close in the third quarter of 2021, the company said. (Reporting by Noor Zainab Hussain in Bengaluru, Krystal Hu in New York and Stephen Nellis in San Francisco; Editing by Ramakrishnan M. and Diane Craft)