According to the Wall Street Journal, citing informed sources, recently, Qualcomm has approached Intel on the acquisition. It would be one of the largest and most far-reaching deals in recent years.
The deal is far from certain, the people said. Even if Intel were willing to accept, a deal of that size would almost certainly attract intense antitrust scrutiny, though it could also be seen as an opportunity to strengthen the United States' competitive edge in chips. In order to complete the deal, Qualcomm may intend to sell Intel assets or part of the business to other buyers.
Qualcomm has been a smartphone chip-giant, mobile communications chip giant. The deal will significantly broaden Qualcomm's business, complementing its cellphone chip business with Intel's chips, which are ubiquitous in personal computers and servers.
Subsequently, the New York Times also quoted two people who were familiar with the matter, further confirming the news.
Qualcomm has yet to make a formal offer to Intel, and the obstacles to a deal remain large. Given the size of the two chip companies and their importance to national security and U.S. semiconductor competitiveness, any deal would likely be subject to intense regulatory scrutiny.
It is unclear whether regulators will allow Qualcomm to buy Intel without buying its troubled foundry business, or whether Qualcomm is willing to take on the complex task.
The deal is also costly. Intel's share price has fallen by nearly 40% over the past year, to a new market value of $93.3 billion; Qualcomm's shares rose more than 50 percent and its latest market capitalization was $188.2 billion.
The acquisition comes at a time when Intel is facing one of the worst crises in its 50-year history.
For years, Intel has been the world's most valuable semiconductor company, but now it lags behind rivals such as Nvidia, Qualcomm, Broadcom, Texas Instruments, and AMD.
Its shares were down about 60% so far this year before the Wall Street Journal reported the takeover plans. As recently as 2020, the company's market capitalization was over $290 billion. The stock closed up more than 3% on Friday after the Wall Street Journal report.
Intel CEO Pat Gelsinger is trying to build a chip foundry business. Intel has been in a turnaround effort for more than three years under CEO Henry Kissinger, but has yet to yield significant results.
Qualcomm, under the leadership of Qualcomm CEO Armon, has approached Intel, hoping to produce chips at Intel's plants. But the Journal reported last year that Qualcomm stopped that effort due to technical errors.
In August, after a poor quarterly earnings report, Intel announced plans to cut 15,000 jobs and suspend its dividend to save costs.The company posted a $1.6 billion loss in the second quarter, compared with a $1.5 billion profit in the same period last year, prompting Kissinger to lay out a road map for cutting costs by more than $10bn by 2025.
Intel director Tan Lip-Bu also shocked many when he abruptly quit the board in late August. They had thought he would eventually become the leader of some of Intel's businesses if they were broken up.
Earlier this week, Intel said it would further separate its chip manufacturing and design operations, suspending plant projects in Germany and Poland for two years and a manufacturing project in Malaysia until demand picks up, among a series of other measures. The moves follow a board meeting in early September to discuss strategy.
Intel began reporting financial results for its manufacturing operations separately earlier this year, which many on Wall Street see as a prelude to a possible break-up of the company.
Some analysts believe that Intel should be divided into two, reflecting the industry's focus on either chip design or chipmaking. However, Bernstein Research analyst Stacy Rasgon wrote in a recent note that an immediate break-up may not be possible. Since Kissinger opened the factory to outside chip design firms three years ago, Intel's manufacturing division has been loss-making and has not gained strong traction with customers outside of Intel itself.
A decade ago, it would have been unthinkable for any chipmaking competitor to consider buying Intel. However, years of management problems and failed technology transitions have weakened what was once one of Silicon Valley's most powerful companies.
Given Intel's market capitalization, a Qualcomm acquisition would be the biggest tech deal ever, surpassing Microsoft's $69 billion acquisition of Activision Blizzard.