Qualcomm’s takeover of Intel could raise antitrust concerns

A potential acquisition by Intel could accelerate Qualcomm’s diversification, but it will saddle the smartphone chipmaker with a semi-defunct manufacturing unit that could be difficult to reposition or sell, sources said. analysis

The takeover will also face strong global anti-trust scrutiny as it would combine two major chip companies in what would be the biggest deal in the industry’s history, creating a giant company with a large share of the smartphone markets, PC and servers.

Intel shares rose 3% on Monday after media reports emerged late Friday about Qualcomm’s interest in buying the chipmaker.

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

“However, the actual chance of this happening is very small. In addition, it is unlikely that Qualcomm would want all of Intel and try to separate the product business,” he said.

Once a dominant force in the semiconductor industry, five-year-old Intel is going through one of its worst periods as losses mount at its contract manufacturing unit which it is building to compete with TSMC.

Intel’s market value has fallen below $100 billion for the first time in three decades as the company missed out on the next-generation artificial intelligence boom after exiting its investment in OpenAI.

At the end, its market capitalization was less than half of what Qualcomm expected, worth about $190 billion.

Given that Qualcomm had about $7.77 billion in cash and cash equivalents on hand as of June 23, analysts expect the deal to be largely stock-funded and a major dilution for investors. Qualcomm, which is likely to cause some concern.

Qualcomm, which also supplies Apple, has accelerated efforts to expand beyond its core smartphone business with chips for businesses such as cars and personal computers under CEO Cristiano Amon. However, it still relies too much on the mobile market, which has struggled in recent years due to falling demand.

Ammons is personally involved in negotiations with Intel and has been looking at different options for a contract with the company.

This is not the first time that Qualcomm has tried to make a big acquisition. It offered to buy rival NXP Semiconductors for $44 billion in 2016, but abandoned the offer two years later after failing to get approval from Chinese regulators.

While Intel designs and manufactures its own chips that power PCs and data centers, Qualcomm has never operated a chip factory. It uses contract manufacturers such as TSMC, as well as designs and other technologies provided by Arm Holdings.

Qualcomm does not have the experience needed to grow the new foundry at Intel, which Amazon.com recently announced as its first major customer, according to analysts.

Intel’s foundry business is considered critical to Washington’s goal of increasing domestic chip production. The company has received approximately $19.5 billion in federal grants and loans under the CHIPS Act to build and expand plants in four US states.

Some analysts said Intel would prefer an outside investment to a sale, pointing to recent moves to make the foundry industry more independent.

Over the weekend, Bloomberg News reported that Apollo Global Management, which was already Intel’s partner in the Irish company, had offered to invest up to $5 billion in the company.

Qualcomm could also decide to buy parts of Intel’s business rather than the entire company as a whole.