In what would be the biggest acquisition in semiconductor history, Qualcomm is reportedly interested in buying Intel Corp.
According to a report from Reuters, while the semiconductor deal would help to diversify Qualcomm’s portfolio, it would also upset the entire semiconductor industry after Intel has worked for the past two years to garner a foothold in the semiconductor manufacturing sector.
Additionally, a buyout would face tough antitrust scrutiny globally as it would create a giant chipmaker with a strong market share in smartphones, PCs and servers.
"The rumored deal between Qualcomm and Intel is intriguing on many levels and, from a pure product perspective, makes a certain degree of sense as they have a number of complementary product lines," Bob O'Donnell, founder of TECHnalysis Research told Reuters. "The reality of it actually occurring, however, is very low. Plus, it is unlikely Qualcomm would want all of Intel and trying to break apart the product business from the foundry business right now just would not be possible.”
Why is it happening?
Intel currently is undergoing a struggling period in its history. The company has laid off thousands and has readjusted its market strategy after its value fell below $100 billion for the first time in decades.
Just last week, Intel said it would spin off its semiconductor manufacturing arm, called Intel Foundry, into a wholly owned subsidiary to shore up its main business while continuing to develop domestic chipmaking capability.
Intel Foundry has received $8.5 billion from the CHIPS and Science Act to construct four fabs in the U.S. —two in Arizona and two in Ohio — and just last week received an additional $3 billion through the U.S.’s Secure Enclave program to allow it to build chips for the military and aerospace industries.
What would Qualcomm take?
Undoubtedly Qualcomm would take the processor units of Intel as it has been vocal about moving beyond its mainstay smartphone semiconductor business.
Qualcomm, which supplies Apple with chipsets, has been looking to expand its portfolio in the automotive and PC sectors. Analysts said this is mostly due to its reliance on the mobile market. While the smartphone market is predicted to bounce back this year, it has struggled in the past two years with declining shipments.
According to Reuters, Qualcomm has been examining various options for a deal with Intel. It is unclear if Qualcomm would be interested in inheriting the semiconductor manufacturing business as it currently gets its chips from Intel Foundry rival Taiwan Semiconductor Manufacturing Co. (TSMC).
It may be interested in Mobileye, Intel’s autonomous and advanced driving assistance system (ADAS) technology arm, as it looks to diversify into automotive.
But until this deal moves closer to fruition, if it happens at all, the market won’t know what exactly Qualcomm would take of Intel and what it might spin off or leave behind.
However, it is unlikely that the foundry part of Intel would be scrapped due to it being the center point of America’s attempt to grow its domestic semiconductor manufacturing business. Intel, given more than $11 billion through the CHIPS Act, is crucial to the U.S. government plans.
Alternatives
According to the report, it might be preferred that the Intel Foundry portion be invested in by outside sources that would make it more independent. Apparently, an investment firm has offered up to $5 billion to help develop the foundry market for Intel.
This type of investment may allow Qualcomm to take what it wants from Intel and the manufacturing business folded into an independent entity.
