Over the weekend, the news that American chip giant Qualcomm would buy Intel, another chip giant in deep trouble, exploded across the industry. Intel shares rallied after the Wall Street Journal first broke the news on Friday, closing up 8% on Friday. According to the Wall Street Journal, Qualcomm recently made an offer for Intel. However, the Financial Times later revealed that Qualcomm’s deal for Intel was far from certain and that Qualcomm had never“Formally” communicated its intention to acquire the company.
How viable is the acquisition?
Intel’s shares have fallen 50 per cent since the start of the year, leaving the company to deal with risk from potential acquirers and threats from hostile shareholders.
According to several financial media reports, Intel’s market capitalisation now stands at $93bn. If Qualcomm does buy Intel, the deal could surpass Microsoft’s $69bn takeover of Activision Blizzard, the US gaming company, as the biggest-ever acquisition in the technology industry. Intel is working with Goldman Sachs and Morgan Stanley to assess interest in Qualcomm, sources said, according to the Financial Times. Intel is indeed considering various asset sales, sources said, and Qualcomm is considering buying a number of different Intel assets to spark the idea of buying Intel as a whole. Qualcomm, which has a market capitalisation of $188bn, is said to be working with Evercore to assess its next move towards Intel.
Intel announced a delay in the construction of its plant, pictured here in Magdeburg, Germany.
Axios news network analysis, Qualcomm acquisition of Intel will face great challenges. First, M & A requires huge sums of money, which Qualcomm has yet to disclose. But the biggest challenge to Qualcomm’s bid for Intel will come from antitrust regulators. Broadcom, the chip giant, tried to buy Qualcomm in 2017, but President Donald Trump scuppered the deal in 2018 on national security grounds. Axios even predicted that the deal would be the most important antitrust case on the new US President’s desk after November’s presidential election, once Qualcomm formally embarks on the acquisition process.
News of Intel’s possible takeover came as Bloomberg quoted sources as saying on the 22nd that Apollo Global Management had offered to invest in Intel, investment could be as high as $5bn. There is media interpretation, this move or can be seen as the intel“Turnaround battle” vote of confidence.
How“Overlord” became an acquisition target
Although the rumors have not been confirmed, Intel’s predicament is real. Intel, once the world’s leading chip company, has faded in recent years, particularly as it has been left behind by Nvidia in the era of artificial intelligence.
Reuters has revealed that Intel had a chance in the artificial intelligence race, but voluntarily abandoned the opportunity. Intel had been in contact with the then little-known start-up, OpenAI, seven years ago and the two were in months of talks about Intel buying a 15 per cent stake in OpenAI for $1bn in cash, according to people familiar with the matter. One big reason Intel decided to walk away from the deal was that Swann, then Intel’s chief executive, found it difficult to get AI models to market in the short term and to make a return on the investment.
Intel executives and industry experts said in interviews that it was a“Strategic misfortune” for the company to abandon the OpenAI partnership, a series of“Strategic misfortunes” over the years have also led Intel, the PC-era champion, to wrestle with the AI age. According to the Wall Street Journal, Intel had already suffered some setbacks in chip manufacturing before the AI boom, with rival Nvidia’s chip technology highly suited to AI needs, intel’s technology was given the cold shoulder.
Intel, which lost $1.6 bn in the second quarter of this year, launched mass lay-offs in August and earlier this month unveiled plans to restructure its business in an attempt to save itself. A former Intel board member told Reuters that the measures taken by the company were insufficient and too late.
The vibration industry
The impact of the potential merger on the industry is also being closely watched and studied in advance. Qualcomm, which specializes in mobile phone chips, needs to diversify its business and the acquisition of Intel will make it the largest PC and server processor maker immediately, according to an analysis on the 21st, and it will get the chip-making plants it never had. That is why Taiwan is highly focused on the potential acquisition.
However, Taiwan’s economic daily believes that even if Qualcomm buys Intel, it will not recycle chip orders released to TSMC because Intel’s technology and yield are far inferior to TSMC’s, so the deal will have little impact on TSMC. Qantas also pointed out that while Qualcomm’s acquisition of Intel would create a large chip company, the combination would still be technically difficult to challenge Nvidia as the leader in artificial intelligence chips.
Qualcomm may see an opportunity to defeat Nvidia by deploying AI on local mobile devices, in the context of so-called “Edge AI” development, according to Qantas.com, the latter does not have mobile AI chip technology. Intel’s strong position in chip packaging may help Qualcomm build stronger mobile AI chips, which may be a more profound consideration for Qualcomm’s acquisition of Intel.