According to The Wall Street Journal, Qualcomm has reached out to Intel regarding a potential takeover of the company, which currently holds a market value of approximately $90 billion.
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Intel has been on the decline for some time, with the company looking to make up to $10 billion worth of savings through a series of cost-cutting measures ranging from sizable staff reductions to halting European expansion plans.
Despite no official offer being made, news of Qualcomm’s reported interest in Intel saw the beleaguered brand’s stock price soar to above $22 for the first time in months following record-low share prices.
WHAT COULD QUALCOMM BUY
In terms of what’s on offer, Intel confirmed last week it’s looking to part with its stake in Altera, its programmable logic device manufacturing company.
Having purchased Altera in 2015 in a $16 billion deal, Intel plans to sell its stake, though still wants the company to go public.
Also reportedly under consideration is Intel's chip design division, which develops designs such as its leading processors for PCs.
Intel has been a market leader in the PC CPU space but has faced increased competition from the likes of AMD, Samsung, and even Qualcomm in recent years.
Reports of Qualcomm’s interest in Intel’s design division could prove a boon to Qualcomm’s own mobile processor work, including its Snapdragon hardware which is aimed at both PCs and mobile devices.
Off the table is Intel’s stake in chip designer Arm after it sold all of 1.18 million shares in the company last month.
Potentially part on it though could be Intel’s Foundry business, which manufactures chips for third parties.
Rumours suggested the foundry business — which reported a $7 billion operating loss last year — could be part of Intel’s cost-cutting plans, but the company announced last week it intends to spin it off into a separate unit.
Qualcomm focuses on designing chips, instead relying on third-party suppliers to conduct manufacturing and assembly of its chips, including including TSMC, Samsung, and Amkor Technology — but not Intel.
Purchasing Intel’s foundry business unit would enable Qualcomm to both design and manufacture its own hardware, somewhat reducing reliance on its array of suppliers.
Vlad Galabov, director of the cloud and data centre research practice at Omdia envisioned a world where Qualcomm would acquire Intel’s chip design business. Intel would continue to operate its fabs as an independent foundry like TSMC.
“Such a move won’t change the makeup of the semiconductor market too much and might even improve competition a bit, so I can see how regulators approve it,” Galabov said.
“In this hypothetical situation there’d be five big foundries: TSMC, Intel, Samsung, Semiconductor Manufacturing International Corporation (SMIC) and GlobalFoundries; and quite a few chip design powerhouses - the top cloud guys (Microsoft, AWS, Google, Meta, Alibaba, etc.), AMD, Nvidia, Apple, Qualcomm, Huawei… (the list gets long).”
COMPETITION & REPUTATION CONCERNS
Woz Ahmed, a semiconductor strategy consultant, suggested in a LinkedIn post that in addition to antitrust issues, such a deal could also distract Qualcomm and potentially hurt the company, should Intel's issues infect it.
“Qualcomm’s rivals could potentially benefit either way, for a certain time period,” Ahmed added.
Qualcomm though is no stranger to being in a tumultuous position, having weathered a hostile takeover attempt by Broadcom in 2018.
Lian Jye Su, chief analyst for applied intelligence at Omdia, said the failed Broadcom deal shows Qualcomm “is more than prepared to handle the heat.”
“Realistically speaking, I don't expect this deal to get through the regulator as it will create a dominant entity in the consumer devices and automotive space,” Su said. “At the same time, I have also heard that Qualcomm is struggling to get more sales for its AI PC — the reviews on Intel new Lunar Lake chip is very favourable. I think this might be a strategy to divert some unwanted attentions away.”
Any attempt by Qualcomm to purchase Intel or a part of its business would face intense scrutiny from regulators.
If the chip designer seeks to buy Intel outright, it might well constitute one of the biggest mergers in tech history.
Nvidia failed in its attempts to purchase Arm back in 2022 after regulators from around the world conducted rigorous analysis into competition impacts — with any prospective Qualcomm/Intel deal likely to face the same level of inquiry.
Technology author and blogger Jeffrey Cooper suggested that competition concerns could be manageable, particularly if Intel manages to spin off its foundry business as planned.
“Realistically, there's almost a zero per cent chance that a potential deal between Qualcomm and Intel includes the foundry: it's bleeding cash, is on its way towards a spin-off down the road anyway and Qualcomm has been a happy TSMC customer for years,” Cooper wrote on LinkedIn.
“Should an acquisition come to fruition, I imagine it will speed up Intel management's timeline for the spin-off to perhaps sooner than they were expecting. Another possibility is that interest from Qualcomm was already expressed before the emergency shareholder meeting, where Intel decided to make the foundry an independent subsidiary. In that case, that decision might have been setting the stage for an eventual acquisition and carve-out.”
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