Qualcomm’s potential acquisition of Intel could raise antitrust and foundry concerns

The acquisition will also face intense antitrust scrutiny globally as it would unite two key chip companies in what would be the industry’s largest-ever deal, creating a player with a dominant presence in smartphones, PCs and servers. A behemoth of powerful proportions.

Intel shares rose nearly 3% on Monday after media reports late Friday about Qualcomm’s early steps against the troubled chipmaker. Qualcomm shares fell 1.8%.

Bob O’Donnell, founder of TECHnaanalysis Research, said: “The rumored deal between Qualcomm and Intel is interesting on many levels and makes some sense from a pure product perspective. , because they have many complementary product lines.”

“However, the likelihood of this actually happening is very low. Furthermore, Qualcomm is unlikely to want all of Intel’s shares, and trying to separate the product business from the foundry business is impossible now,” he said.

Once a dominant force in the semiconductor industry, five-year-old Intel is facing one of its worst times as losses mount at the contract manufacturing unit it is building in hopes of challenging TSMC.

Intel’s market capitalization fell below $100 billion (roughly Rs. 8,36,313 crore) for the first time in three decades as the company missed out on the generative AI boom after abandoning its investment in OpenAI.

As of the last close, its market capitalization was less than half that of potential acquirer Qualcomm, which has a market capitalization of about $190 billion (approximately Rs. 15,88,934 crore).

Analysts expect the deal to be financed primarily through equity and will be highly dilutive for Qualcomm investors, potentially would cause some concern.

Qualcomm, which also supplies Apple, has accelerated its efforts under Chief Executive Cristiano Amon to supply chips to industries including cars and personal computers, beyond its main smartphone business. But it remains overly reliant on the mobile market, which has struggled in recent years due to a post-pandemic slump in demand.

Sources told Reuters that Amon was personally involved in Intel negotiations and had been studying options for a deal at the company.

This is not the first time Qualcomm has made a large-scale acquisition. In 2016, the company proposed to acquire rival NXP Semiconductors for $44 billion (about Rs 3,67,973 crore) but abandoned the acquisition two years later after failing to obtain approval from Chinese regulators.

Casting Difficulties

While Intel designs and makes the chips that power personal computers and data centers, Qualcomm has never operated a chip factory. It uses designs and other technology provided by contract manufacturers such as TSMC and Arm Holdings.

Analysts say Qualcomm lacks the experience needed to expand Intel’s fledgling foundry business, which recently named Amazon as its first major customer.

“We don’t know why Qualcomm would be a better owner of these assets,” said Bernstein’s Stacy Rasgon.

“We also don’t really see a scenario without them; we don’t think anyone else would really want to run them and believe it’s unlikely to be politically feasible to abolish them,” he added.

Intel’s foundry business is seen as critical to Washington’s goal of developing domestic chip manufacturing. The company has received approximately $19.5 billion (approximately Rs. 1,63,079 crore) in federal grants and loans under the CHIPS Act for construction and expansion of plants in four US states.

Some analysts say Intel prefers outside investment to a sale, pointing to recent moves to make its foundry business more independent.

Bloomberg News reported over the weekend that Apollo Global Management has become a partner of Intel’s Ireland factory and has invested up to $5 billion (approximately Rs. 41,814 crore) in the company.

Qualcomm may also decide to buy parts of Intel’s business rather than the entire company. Reuters reported earlier this month that it was particularly interested in Intel’s PC design unit.

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