Troubled titan: Gelsinger speaking at an event in Taiwan. Intel is delaying plans to build two mega factories in Germany and Poland as the company faces lower demand. — AFP
SAN FRANCISCO: Qualcomm has in recent days approached Intel to explore a potential acquisition of the troubled chipmaker, a source familiar with the situation says, in what could be a transformational deal in the sector but faces many hurdles.
Qualcomm CEO Cristiano Amon is personally involved in the negotiations to acquire five-decade-old Intel, according to the source who was briefed on the matter.
Another person familiar with the situation said Amon has been actively examining various options for a deal for the company.
Earlier this month, Reuters reported that Qualcomm explored the possibility of acquiring portions of Intel’s design business and that its PC design unit was of particular interest. Qualcomm executives were examining Intel’s entire portfolio of businesses.
The conversations with Intel are at an early stage. The San Diego-based company has not made a formal offer for Intel, according to a third person familiar with the matter.
The sources requested anonymity as the discussions are confidential.
Intel declined to comment. Qualcomm did not immediately respond to a Reuters request for comment.
The approach by Qualcomm comes at a moment of weakness for Intel, which was once the most valuable chipmaker in the world, but whose shares have lost nearly 60% of their value since the start of the year.
A deal, should it go ahead, would likely invite scrutiny from antitrust regulators in the United States, China and Europe. Qualcomm may be required to divest parts of Intel in order to gain regulatory approvals.
A bid would mark the biggest takeover attempt in the technology industry since Broadcom sought to buy Qualcomm for US$142bil in 2018, before president Donald Trump nixed the tie-up, citing national security risks.
Reuters could not determine how Qualcomm, which has a market value of US$188bil, would finance a bid for Intel, which is valued at US$122bil, including its debt.
Qualcomm has roughly US$13bil in cash, according to recent company filings.
It is also unclear how Qualcomm would handle the takeover of Intel’s contract-manufacturing business.
To build chips with an atomic level of precision, Intel has invested hundreds of billions of US dollars over decades on its fabrication process and amassed tens of thousands of engineers to do it.
Qualcomm has never operated a chip factory, or fab, and currently contracts the likes of Taiwan Semiconductor Manufacturing Co and uses designs and other technology supplied by Arm Holdings.
Once the dominant force in chipmaking, Intel ceded its manufacturing edge to Taiwanese rival TSMC and failed to produce a widely desired chip for the generative artificial intelligence (AI) boom capitalised on by Nvidia and AMD.
Intel has been attempting to turn its business around by focusing on AI processors and creating a chip contract manufacturing business, known as a foundry.
As part of a memo from chief executive Pat Gelsinger, Intel released a series of announcements that stemmed from a board meeting earlier this month.
Gelsinger and other executives presented a plan to shave off businesses and restructure the company, Reuters had previously reported.
The company plans to pause construction on factories in Poland and Germany, and reduce its real estate holdings. Intel also said it had reached a deal to make a custom networking chip for Amazon.com’s AWS.
The Wall Street Journal reported on Qualcomm’s talks with Intel earlier last Friday. — Reuters
