In a recent interview, Bob O’Donnell, founder of research firm TECHnalysis Research, stated that the rumored acquisition of Intel by Qualcomm is highly unlikely to materialize. He emphasized that while the potential deal is intriguing on many levels, the chances of it actually happening are very low. O’Donnell pointed out that besides antitrust review concerns, Qualcomm is also unlikely to want all of Intel’s business.
The rumors of Qualcomm’s interest in acquiring Intel, a struggling chip manufacturer, have been circulating recently. Many analysts believe that this potential deal could accelerate Qualcomm’s diversification efforts. However, it would also bring some burdens, such as Intel’s loss-making semiconductor manufacturing division.
O’Donnell commented, The rumored Qualcomm acquisition of Intel deal is intriguing on many levels, and from a purely product perspective, there is some rationale, as the two companies have many complementary product lines. However, the chances of this deal actually happening are very low. Moreover, Qualcomm is unlikely to want all of Intel’s business, and it is also impossible to separate the product business from the manufacturing business at this point.
Intel, a semiconductor industry powerhouse with a 50-year history, is currently facing its worst crisis. The company’s chip manufacturing division is experiencing increasing losses. At the same time, Intel missed the boom in generative AI after failing to invest in OpenAI.
Intel’s market value has fallen below $100 billion for the first time in 30 years. As of last Friday’s closing, its market value is less than half of Qualcomm’s, which is approximately $190 billion.
Considering that Qualcomm only has about $77.7 billion in cash and cash equivalents (as of June 23), analysts predict that the potential transaction will be primarily financed through stock, which could have a significant dilutive effect on Qualcomm investors and may raise some concerns.
Under CEO Cristiano Amon’s leadership, Qualcomm has accelerated its expansion into business areas outside of its main smartphone business, providing chips for industries such as automotive and PC. However, Qualcomm remains overly dependent on the mobile market, which has been struggling in recent years due to a post-pandemic decline in demand.
Insiders say Amon personally participated in the negotiations to acquire Intel and has been researching various transaction options for the company.
This is not the first time Qualcomm has attempted a large-scale acquisition. In 2016, Qualcomm proposed to acquire rival NXP Semiconductors for $44 billion but abandoned the deal two years later after failing to obtain regulatory approval.
Intel primarily designs and manufactures chips for PCs and data centers, while Qualcomm has never operated a chip factory. Instead, it uses foundry partners like TSMC and technology from Arm.
Analysts believe that Qualcomm lacks the experience needed to strengthen Intel’s emerging foundry business. Recently, Intel listed Amazon as its first major customer for its foundry business.
Bernstein analyst Stacy Rasgon commented, We also don’t know why Qualcomm would be a better owner of these assets.
Rasgon added, We believe that no one else would truly want to operate them, but it is also politically unlikely to scrap them.
Intel’s foundry business is seen as a key to developing the U.S. chip manufacturing industry. The company has received approximately $19.5 billion in federal grants and loans under the CHIPS Act to build and expand factories in four states across the U.S.
Some analysts say that Intel may prefer external investment rather than a sale. They also note that Intel recently announced plans to spin off its chip manufacturing business and establish it as an independent subsidiary.
Additionally, earlier today, reports indicated that Apollo Global Management has proposed to invest up to $5 billion in Intel. Apollo Global Management is already a partner in Intel’s Irish factory.
Furthermore, Qualcomm may decide to acquire only a portion of Intel’s business, rather than the entire company. Earlier this month, reports stated that Qualcomm is particularly interested in Intel’s PC design division.
Views: 0