Qualcomm may have approached Intel about an acquisition in recent days

Qualcomm has approached Intel in recent days to explore a potential takeover of the struggling chipmaker, a source familiar with the matter said Friday. It could be a transformative deal for the industry, but many hurdles remain.

Qualcomm CEO Cristiano Amon is personally involved in negotiations to acquire the five-decade-old Intel, the source familiar with the matter said. Another person familiar with the matter said Amon has been actively exploring various options for a deal for the company.

Earlier this month, Reuters reported that Qualcomm was exploring the possibility of acquiring parts of Intel’s design business, and that the PC design unit was of particular interest. Qualcomm executives were examining Intel’s entire portfolio of businesses.

Talks with Intel are in the early stages. The San Diego company has not yet made a formal offer for Intel, a third person familiar with the matter said.

The sources wish to remain anonymous because the conversations are confidential.

Intel declined to comment. Qualcomm did not immediately respond to a Reuters request for comment.

Shares of Intel closed up 3.3%, while Qualcomm fell 2.9%.

Qualcomm’s move comes at a time of weakness for Intel, once the world’s most valuable chipmaker but whose shares have lost nearly 60% of their value since the beginning of the year.

A deal, if it goes through, would likely trigger scrutiny from antitrust regulators in the United States, China and Europe. Qualcomm may have to divest parts of Intel to get approval from regulators.

A bid would be the biggest takeover attempt in the technology sector since Broadcom tried to buy Qualcomm for $142 billion in 2018 before President Donald Trump halted the merger, citing national security risks.

Reuters could not determine how Qualcomm, which has a market value of $188 billion, would finance a bid for Intel, which is valued at $122 billion, including debt.

According to recent company filings, Qualcomm has about $13 billion in cash on hand.

It’s also unclear how Qualcomm would approach acquiring Intel’s contract manufacturing business. To build chips with atomic precision, Intel has spent decades pouring hundreds of billions of dollars into its manufacturing process and amassing tens of thousands of engineers to do it.

Qualcomm has never operated a chip factory and currently works with companies such as Taiwan Semiconductor Manufacturing Co. The company uses designs and other technologies supplied by Arm Holdings.

Intel’s problems

Intel was once the dominant player in the chip industry, but lost its market lead to Taiwanese rival TSMC and failed to produce a sought-after chip for the generative AI boom that Nvidia and AMD capitalized on.

Intel is trying to get its business back on track by focusing on AI processors and setting up a contract chip manufacturing business, a so-called “foundry.”

As part of a memo from CEO Pat Gelsinger, Intel released a series of announcements stemming from a board meeting last week. Gelsinger and other executives laid out a plan to divest businesses and restructure the company, Reuters previously reported.

The company plans to pause construction of factories in Poland and Germany and reduce its real estate holdings. Intel also said it had struck a deal to make a custom networking chip for Amazon.com’s AWS.

The Wall Street Journal reported earlier on Friday about the talks between Qualcomm and Intel.

© Thomson Reuters 2024