Key points:

  • Qualcomm has made an offer to purchase Intel, which has been facing financial challenges.
  • The deal could face numerous hurdles, including antitrust regulatory scrutiny.
  • Intel is taking steps to restructure its business in response to deteriorating financials and increased competition.

A source familiar with the matter revealed on Friday that Qualcomm had approached Intel with a proposal to potentially acquire the struggling chipmaker. This deal, which could significantly reshape the industry landscape, is likely to encounter numerous obstacles.

Following this news, Intel’s shares closed up 3.3%, while Qualcomm’s shares dipped 2.9%.

Negotiation progress

Cristiano Amon, Qualcomm’s CEO, is personally leading negotiations for a potential Intel acquisition, according to sources close to the matter. Amon is actively exploring various deal options, aiming to find the optimal solution for the company. Previously, Qualcomm had expressed interest in purchasing part of Intel’s design business, particularly the PC segment. Qualcomm’s management is currently conducting a thorough analysis of Intel’s entire portfolio of businesses.

Negotiations are at an early stage, and according to another source, a formal offer to Intel has not yet been made. Qualcomm’s interest has surfaced amid Intel’s financial difficulties. Once the world’s most valuable chipmaker by market capitalization, Intel has lost nearly 60% of its value this year.

Monopoly threat

A potential Qualcomm acquisition of Intel is bound to attract close scrutiny from antitrust regulators in major world economies: the United States, China, and the European Union. To secure necessary approvals, Qualcomm would likely have to divest certain Intel assets. In terms of scale, this could potentially be one of the largest technology deals in recent years, comparable to Broadcom‘s attempt to acquire Qualcomm in 2018, which was blocked on national security grounds.

It remains unclear how Qualcomm, with a market capitalization of $188 billion, intends to finance the purchase of Intel, which is valued at $122 billion including debt. Additionally, integrating Intel’s contract manufacturing business, into which the company has invested significant resources and achieved a high level of technological maturity, presents challenges. Amid growing competition from TSMC, Intel has been forced to transform its business model, focusing on promising areas such as artificial intelligence and contract chip manufacturing.

A recent Intel board meeting resulted in a series of decisions aimed at optimizing the business and restructuring the company. CEO Pat Gelsinger presented a plan involving the reduction of certain business areas and the reallocation of resources.