Qualcomm's interest in acquiring Intel cools down amid regulatory and operational hurdles

Back in September of this year, reports indicated that Qualcomm was considering to take over Intel's chip design business. The move might have helped Qualcomm expand its product offerings and strengthen its position in the semiconductor market, especially after the Blue team has been struggling with growth in recent years. The deal was put on hold during the US elections. Now, however, it looks like Qualcomm's interest in taking over Intel might have cooled down.

Qualcomm has been making mobile chips for a long time now, and this time, it was interested in Intel's client PC design business where it designs chips for laptops and desktops. With the recent push for ARM processors in PCs, Qualcomm also has a lot of products that are capable of running on a PC. The acquisition would have helped Qualcomm further tap into the PC business. Despite all these pros, Qualcomm never made a formal approach to Intel regarding the acquisition, with the majority of the discussion only remaining at a preliminary stage.

Team Blue on the other hand faced significant challenges over the past few years. Intel has seen a decline in its market share, both in consumer and enterprise sectors. In 2023, the company reported a 14% drop in revenue as compared to 2022. Intel also owns fabrication units (where semiconductors are manufactured) but has struggled with production issues, with over $7 billion in losses in 2023, and has increasingly started relying on outsourcing its manufacturing to companies like Taiwan Semiconductor Manufacturing Company (TSMC). As part of a new strategic plan, Intel was considering selling off non-core business units and scaling back on capital expenditure to improve cash flow.

While Qualcomm did show interest initially in acquiring parts of Intel, Bloomberg reports that this interest has since then cooled down. Perhaps the most significant hurdle for Qualcomm in this potential acquisition is the regulatory scrutiny that any merger between two major semiconductor companies would attract. Given the size and the market impact of such a deal, U.S. regulators and abroad would watch it closely for any potential antitrust violations. AMD and Intel also have a reciprocal cross-licensing agreement that allows both companies to use each other's patented technologies. AMD licenses the x86 architecture from Intel, while Intel licenses the x86-64 (AMD64) extensions from AMD. However, the agreement would automatically terminate if either company undergoes a change of control, such as being acquired, which adds up to the complexities of the deal.

Despite the struggles, Intel still has a substantial market capitalization of around $96 billion, which raises the question of whether Qualcomm can really afford to buy Intel in the first place. An acquisition of this level would put significant financial strain on Qualcomm and it could be overwhelming for the company to address Intel's ongoing challenges.

Via Bloomberg (paywall)