Qualcomm has reached out to Intel in recent days to discuss a possible acquisition of the struggling chipmaker, according to a person with knowledge of the matter on Friday.
TakeAway Points:
- Qualcomm has reached out to Intel in recent days to discuss a possible acquisition of the struggling chipmaker. Although there are numerous obstacles in the way, this merger might be a game-changer for the industry.
- The discussions with Intel are at an early stage.
- The approach by Qualcomm comes at a moment of weakness for Intel, whose shares closed up 3.3%, which was once the most valuable chipmaker in the world, but whose shares have lost nearly 60% of their value since the start of the year.
Qualcomm to buy Intel
This might be a game-changing agreement for the industry, but there are a lot of obstacles to overcome.
Qualcomm CEO Cristiano Amon is personally involved in the negotiations to acquire five-decade-old Intel, according to the source who was briefed on the matter. Another person familiar with the situation said Amon has been actively examining various options for a deal for the company.
Earlier this month, Reuters reported that Qualcomm explored the possibility of acquiring portions of Intel’s design business and that its PC design unit was of particular interest. Qualcomm executives were examining Intel’s entire portfolio of businesses.
The conversations with Intel are at an early stage. The San Diego-based company has not made a formal offer for Intel, according to a third person familiar with the matter.
Intel’s shares closed up 3.3%, while Qualcomm fell 2.9%.
The approach by Qualcomm comes at a moment of weakness for Intel, which was once the most valuable chipmaker in the world, but whose shares have lost nearly 60% of their value since the start of the year.
A deal, should it go ahead, would likely invite scrutiny from antitrust regulators in the United States, China, and Europe. Qualcomm may be required to divest parts of Intel in order to gain regulatory approvals.
Qualcomm’s takeover plans
A bid would mark the biggest takeover attempt in the technology industry since Broadcom sought to buy Qualcomm for $142 billion in 2018, before President Donald Trump nixed the tie-up, citing national security risks.
However, the report could not determine how Qualcomm, which has a market value of $188 billion, would finance a bid for Intel, which is valued at $122 billion, including its debt.
Qualcomm has roughly $13 billion in cash, according to recent company filings.
It is also unclear how Qualcomm would handle the takeover of Intel’s contract manufacturing business. To build chips with an atomic level of precision, Intel has invested hundreds of billions of dollars over decades on its fabrication process and amassed tens of thousands of engineers to do it.
Qualcomm has never operated a chip factory or fab and currently contracts the likes of Taiwan Semiconductor Manufacturing Co. and uses designs and other technology supplied by Arm Holdings.
Intel’s tragedies
Once the dominant force in chipmaking, Intel ceded its manufacturing edge to Taiwanese rival TSMC and failed to produce a widely desired chip for the generative AI boom capitalized on by Nvidia and AMD.
Intel has been attempting to turn its business around by focusing on AI processors and creating a chip contract manufacturing business, known as a foundry.
As part of a memo from CEO Pat Gelsinger, Intel released a series of announcements that stemmed from a board meeting last week. Gelsinger and other executives presented a plan to shave off businesses and restructure the company, Reuters has previously reported.
The company plans to pause construction on factories in Poland and Germany and reduce its real estate holdings. Intel also said it had reached a deal to make a custom networking chip for Amazon.com’s AWS.
