Qualcomm’s Potential Intel Acquisition May Raise Antitrust and Foundry Concerns, Reports Reuters

By Aditya Soni and Yuvraj Malik

A potential acquisition of Intel by Qualcomm could significantly advance Qualcomm’s diversification efforts but may also encumber the smartphone chipmaker with a struggling semiconductor manufacturing division. Analysts speculate that this division could prove challenging to turn around or offload.

Any buyout would likely encounter significant antitrust scrutiny on a global scale, as it would merge two pivotal players in the chip industry, leading to the largest deal in the sector’s history. This merger would create a dominant entity in the smartphone, personal computer, and server markets.

Following reports about Qualcomm’s early interest in acquiring Intel, shares of Intel experienced nearly a 3% increase, while Qualcomm’s stock dipped by 1.8%. Bob O’Donnell, founder of TECHnalysis Research, noted that while the idea of such a merger is intriguing and makes some sense from a product perspective due to their complementary offerings, the likelihood of it happening is quite low. He added that Qualcomm is unlikely to want to acquire all of Intel and that separating the product business from the foundry division would be nearly impossible.

Intel, a major presence in the semiconductor industry for five decades, is currently enduring significant challenges. Its contract manufacturing unit is facing mounting losses while it attempts to compete with TSMC. The company’s market value has fallen below $100 billion for the first time in 30 years, further exacerbated by its missed opportunities in the generative AI boom after declining an investment from OpenAI.

As of the last report, Intel’s market capitalization was less than half that of Qualcomm, which stands at approximately $190 billion. Analysts predict that the acquisition may be financed mostly through stock, which could be detrimental to Qualcomm’s investors given the potential dilution.

Qualcomm, which supplies products to various companies including Apple, is working to broaden its focus beyond the smartphone segment under CEO Cristiano Amon. The company is expanding into markets like automotive and PCs but still relies heavily on the mobile sector, which has struggled recently due to decreased post-pandemic demand.

Amon is reportedly directly involved in discussions with Intel and is exploring various options for a potential acquisition. This is not Qualcomm’s first foray into large acquisitions; previously, it attempted to purchase NXP Semiconductors for $44 billion in 2016, but the bid was ultimately abandoned due to regulatory hurdles.

While Intel designs and manufactures its own chips for computers and data centers, Qualcomm has never owned a chip factory, instead utilizing contract manufacturers such as TSMC and relying on technology from Arm Holdings. Analysts express concerns about Qualcomm’s lack of experience in managing Intel’s nascent foundry operations, which recently announced Amazon as its first major customer.

Stacy Rasgon of Bernstein questioned why Qualcomm would be a more suitable owner of Intel’s foundry assets, suggesting that without any viable alternatives, it might not be politically feasible to dismantle those businesses.

Intel’s foundry division is key to the U.S. government’s ambitions to bolster domestic chip production. The company has acquired around $19.5 billion in federal grants and loans under the CHIPS Act to establish and grow facilities across several U.S. states. Some analysts believe Intel may favor outside investments over a complete sale, given recent efforts to make its foundry operations more autonomous.

Reports indicate that Apollo Global Management, already a partner in Intel’s operations in Ireland, has offered an investment of up to $5 billion in the company. Additionally, Qualcomm could opt to acquire specific segments of Intel’s business rather than the entire company, with particular interest in Intel’s PC design unit.