Intel-Qualcomm Deal

A potential Intel buyout could boost Qualcomm's diversification but burden it with a loss-making unit, while also facing intense global antitrust scrutiny

In recent days, the struggling chip-giant, Intel has faced the growing possibility of a potential buyout. As the chipmaker is looking for a sustaining deal, Qualcomm is on the verge of proposing a takeover. However, Qualcomm is also fronting to strengthen its footing in the rapidly growing semiconductor landscape.

Now, amidst the deal in the works, Qualcomm faces an analytical warning that this deal can come with significant hurdles, including antitrust scrutiny, foundry concerns, and a hefty price tag. According to industrial sources, Qualcomm’s CEO Cristiano Amon is personally involved in the negotiations, exploring various options for a deal.

But the issue with this deal comes out to be the con of accepting Intel’s lossmaking semiconductor manufacturing wing. However, this buyout would also ensure Qualcomm’s expansion and diversification beyond its smartphone market.

According to Bob O'Donnell, founder of TECHnalysis Research, “The rumoured 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.” He further added, “The reality of it actually occurring, however, is very low.”

Intel is now looking at a buyout due to its recent plummet of $100 billion, the largest in three decades. Moreover, Intel now is gripped with the missed opportunity of generative AI boom addition. On the other hand, Qualcomm priced at $190 Billion is likely to fund the deal primarily through stock, potentially diluting investor value. Another reason for concern for Intel is Qualcomm’s lack of foundry business to turn around Intel’s losses whereas Intel’s foundry is in a nascent phase.

“We do not know why Qualcomm would be a better owner for those assets. We do not really see a scenario without them either; we do not think anyone else would really want to run them and believe scrapping them is unlikely to be politically viable”, said Wall Street Analyst, Stacy Rasgon of Bernstein.

Now, Intel ponders outside funding to stay afloat like Apollo’s $5 billion investment as Intel’s foundry business is paramount to Washinton’s goal of growing domestic chip manufacturing. Why? Because the US government has granted $19.5 billion in federal grants and loans secured under the CHIPS Act.

Alternatively, Qualcomm could opt to acquire specific parts of Intel's business, such as its PC design unit, which would alleviate some of the foundry concerns. The potential deal has sparked significant interest, with Intel's shares rising 3% ahead of Monday's market opening. However, Qualcomm's shares took a hit.

“The reality of the deal actually occurring, however, is very low,” O'Donnell reiterated.

With time it will be clear how Intel chooses to turn its semiconductor business in this economy.