If the Wall Street Journal report is true, it could bring some changes to the smartphone supply chain. According to the report, fabless chip design company Qualcomm is interested in acquiring Intel and has approached the company about a deal. With a market capitalization of over $93 billion, the acquisition would undoubtedly be worth more than $100 billion. Qualcomm may have to sell some of Intel’s assets to fund the deal.
Intel shares have fallen 54% so far this year, while Qualcomm shares have risen 20.5% so far this year. San Diego-based Qualcomm is a so-called fabless chip design company, meaning it does not own its own manufacturing facilities and must rely on third-party foundries to manufacture its chips. Until now, Qualcomm has relied on third-party foundries such as TSMC and Samsung Foundry to manufacture Snapdragon components.
Intel was once the world’s most valuable chipmaker. On Friday, following a WSJ report that Qualcomm was interested in Intel, Intel’s stock price surged just before the close of trading at 4 p.m. EDT, up 70 cents, or 3.31%, to finish the week at $21.84. Qualcomm’s stock price was the opposite of Intel’s, falling $5, or 2.87%, to $168.92 just before the close.
Adding Intel’s chips to Qualcomm’s will allow the company to offer chips for a wide range of products from smartphones to computers, but the deal also allows Qualcomm to compete with AI chip leader Nvidia. Intel will also receive $8.5 billion from the U.S. to build a foundry in the U.S. Intel has been trying to get into the contract foundry business, which makes chips for third-party “fabless” companies, but the business is dominated by TSMC and, to a lesser extent, Samsung Foundry.
Qualcomm was in talks with Intel to manufacture the chips for them, but Qualcomm decided to call off the talks for now, and Intel hasn’t been able to generate enough business to justify putting more money into the project. Qualcomm sells its Snapdragon application processor chips, which help smartphones process and complete tasks. Its modem chips help connect smartphones to the internet.
Intel was once the largest semiconductor company by market capitalization but now trails Qualcomm, Broadcom, Texas Instruments and AMD. Last month, Intel announced plans to lay off thousands of employees and suspend dividend payments.
Some have suggested splitting the company into two divisions, one focused on chip design and the other on chip manufacturing, but that may not happen anytime soon because Intel’s manufacturing division is unprofitable and it has not secured a stable of customers for its foundry business other than making chips for itself.
The biggest tech acquisition ever was Microsoft’s $69 billion purchase of Activision Blizzard. That deal closed last year. Qualcomm’s acquisition of Intel would undoubtedly be a record. But that’s not what Qualcomm has in mind. The company may end up taking control of the factories Intel was looking to use for its contract foundry business. Ultimately, Qualcomm could make its own smartphone chips without having to worry about Samsung foundry yields or TSMC pricing.