Recently, some media reported citing insiders that US chip giant Qualcomm has expressed its intention to acquire its competitor Intel.
On the morning of September 21st, reporters from the Daily Economic News contacted both Qualcomm and Intel to inquire about the situation. As of press time, Qualcomm has not responded, while Intel has stated that it will not comment on the rumors. On September 20th local time, Intel's stock price rose by over 8.8% during trading, reaching a high of $23.14 per share and closing at $21.84 per share, with a daily increase of 3.31%.
As is well known, Qualcomm is currently the global leader in mobile phone chips, with its chips widely used in phones such as Apple, OPPO, vivo, and Xiaomi. Intel's chips are ubiquitous in personal computers and servers, but in recent years, their popularity has declined compared to Qualcomm. As of now, Intel's market value exceeds $93.3 billion, while Qualcomm's is $188.2 billion.
Intel's wafer fabs are very important assets. If Qualcomm acquires Intel, it can make good use of the wafer fabs to produce chips for smartphones and cars, and the production capacity will be more abundant. At present, Qualcomm mainly uses Samsung and TSMC to produce chips. At the same time, the acquisition of Qualcomm will also benefit their entry into the PC field, "a securities analyst told reporters.
In addition, it is worth noting that given the huge scale of the two chip manufacturers, a transaction between them is likely to trigger strict antitrust scrutiny, which means that there are significant obstacles to reaching a deal.
Intel is facing its biggest transformation in over 40 years
In early August this year, Intel released its Q2 2024 financial report: revenue was $12.8 billion, a year-on-year decrease of about 1%; The attributable net loss was approximately 1.6 billion US dollars, while the attributable net profit for the same period last year was approximately 1.5 billion US dollars, a year-on-year shift from profit to loss. In addition, Intel has announced a layoff plan to save costs.
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On the early morning of September 17th Beijing time, Intel CEO Pat Kissinger sent an internal letter to employees, announcing Intel's important actions in the future, including: the foundry business becoming an independent subsidiary; Suspend the construction of new factories in Germany and Poland, and continue to promote the construction of factories in the United States; Maximizing the value of X86 architecture, etc.
At the same time, he also announced the expansion of his strategic partnership with Amazon, which includes joint investment in custom chip design. Intel's foundry will produce AI chips for Amazon on the Intel 18A, and we will also produce customized Xeon 6 chips on the Intel 3 based on our existing partnership. Under this partnership, Intel will produce Xeon scalable processors for Amazon. More broadly, we expect to deepen our cooperation with Amazon on additional designs including the Intel 18A, Intel 18AP, and Intel 14A. In addition, Pat revealed that Intel has achieved more than half of its year-end layoff target of 15000 employees through voluntary early retirement and resignation.
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This is Intel's most significant transformation in over 40 years. Since we transitioned from memory to microprocessors, we have not attempted anything so important. We succeeded at the time - we will embrace this moment and build a stronger Intel for the next few decades, "Pat said.
Despite frequent business adjustments by Intel, according to the analysts from the aforementioned securities firms, this traditional chip giant still faces many challenges at present.
Currently, Qualcomm and Intel are competing in multiple markets, including computer chips, automotive chips, etc., but their models are different. Intel has always been an IDM (Integrated Device Manufacturer) model, not only designing chips but also producing chips on its own, while Qualcomm is a Fabless (fabless) enterprise that does not produce chips and relies on TSMC, Samsung, and others for production. If Qualcomm acquires Intel, it will increase its manufacturing capabilities, thereby affecting the competitive landscape of the OEM market.
Moreover, in the field of computer hardware, the two mainstream CPU architectures currently available are X86 and ARM. The X86 architecture, also known as CISC (Complex Instruction Set Computing), primarily serves the PC and server industries; The ARM architecture, representing RISC (Reduced Instruction Set Computing), dominates in the field of mobile devices. In the past, Qualcomm has been committed to the research and development of chips based on ARM architecture, while Intel mainly uses x86 architecture. In the x86 architecture data center market, Intel once held more than 90% of the market share. If Qualcomm acquires the related business of X86 architecture, it means that the company will dominate the mobile and PC fields.
Mergers between giants often face difficulties in anti-monopoly review
If Qualcomm acquires Intel, it will undoubtedly strengthen the competitive advantage of American chips, but such a huge acquisition also has great uncertainty, and even if both parties have intentions, it will still undergo strict anti-monopoly review. In the past, several large-scale semiconductor acquisitions almost all ended in failure.
In 2017, Broadcom offered over $100 billion to acquire Qualcomm, but the deal was ultimately halted by the Trump administration due to national security concerns.
In late July 2018, on the final deadline for Qualcomm's acquisition of NXP semiconductor manufacturer, the 21 month long acquisition was terminated due to the lack of a "permission" response from the State Administration for Market Regulation of China.
According to a previous report by China National Radio, the reason why Qualcomm's acquisition of NXP has attracted much attention is largely due to NXP being one of the world's largest semiconductor manufacturers. After acquiring Freescale, the company has become the world's largest supplier of MCU (microcontroller units) and automotive chips. Once the acquisition is successful, Qualcomm's business will expand into automotive electronics, identity recognition, radio frequency, and other fields.
In 2021, Nvidia's attempt to acquire Arm was also blocked by the US Federal Trade Commission due to antitrust issues. Afterwards, the transaction was officially terminated in 2022.
Whether Qualcomm's acquisition of Intel can proceed smoothly still requires further observation.
