Source: Wall Street See
Author: Zhou Yuan

"Is this impossible? What is Qualcomm up to?" On September 21st, a semiconductor industry practitioner told The Wall Street Journal, "Is this fake news?" When this experienced professional learned the truth of the matter, they said, "Unbelievable, these two companies lack the foundation for a business combination."

What surprised this person so much was a super short industry information: According to insiders, chip giant $Qualcomm (QCOM.US)$ recently approached its competitor $Intel (INTC.US)$ Submit the intention to acquire.

According to the media report, in order to complete the transaction, Qualcomm may intend to sell Intel's assets or part of its business to other buyers.

Given that Qualcomm is already a giant in smartphone SoC chips and mobile communication chips, if this transaction can successfully close, Qualcomm's business scope can expand.

For example, for the past few years, Qualcomm took advantage of the surge in Generative AI and introduced laptop chips based on the Arm architecture - the Snapdragon 8CX (launched in 2018) and the Snapdragon X Elite (released on October 25, 2023). Among them, the latter became Qualcomm's weapon for entering the laptop market.

In May of this year, Microsoft announced that its upcoming Surface Laptop 7 (to be launched in August) will be equipped with the Snapdragon X Elite.

The Microsoft Surface series is the benchmark for the high-end notebook market for Windows. It represents Microsoft's understanding of the laptop form factor on its largest software platform.

Subsequently, laptop manufacturers represented by Lenovo have released new laptop models, all of which are equipped with Qualcomm Snapdragon, an Arm architecture chip, claiming to be entering the era of AI laptops. The Snapdragon X Elite adopts heterogeneous computing, integrating Oryon CPU, Adreno GPU, and Hexagon NPU, with a computing power of up to 45 Tops.

Among them, the Hexagon processor is a high-performance AI hardware acceleration unit designed for high-performance AI workloads. Considering the usage scenarios of PC as a computing platform, Snapdragon X Elite also integrates an independent Sensing Hub. This Hub includes the Micro NPU, ISP, DSP, and independent memory unit.

This means that this chip can directly perform more AI computing tasks without relying on the CPU, and can effectively reduce the power consumption of the product itself. The integrated structure of these modules constitutes a complete heterogeneous computing system, fully unleashing the AI acceleration capability of the Qualcomm AI engine.

If Qualcomm does indeed acquire Intel, the biggest benefit would be to improve Qualcomm's mobile chip business in the gradually saturated stage by leveraging Intel's ubiquitous chip technology and market advantages in personal computers (PCs) and servers.

Many professionals in the domestic semiconductor industry told Wall Street News, "Qualcomm is unlikely to include Intel's IFS business in the acquisition because it would be too costly and would not bring any benefits to Qualcomm's current main business. The most likely course of action for Qualcomm is to divest the IFS business, acquire other assets, especially PC chip design assets."

But many semiconductor professionals also say that qualcommMergerOn the business side, there is no direct benefit for intel. Even in the AI PC chip business, intel's x86 architecture chips and qualcomm's Arm architecture chips do not overlap in product logic, and there are contradictions in product performance between the two.

How will Qualcomm deal with this issue? How will they resolve it?

Tien Feng International analyst Guo Mingxi believes that first, the acquisition of intel would only benefit qualcomm's AI PC chip business, but after qualcomm's collaboration with microsoft, the growth of qualcomm in the PC market is only a matter of time.

Secondly, although intel's stock price has fallen by over 60% this year, its market cap is still about $93 billion, so the financial pressure of qualcomm's acquisition of intel would be unbearable, and the immediate negative impact on qualcomm's profitability would likely cause qualcomm's net margin to decline from the current 20%+ to single digits or even losses.

Therefore, Guo Mingxi believes that qualcomm's acquisition of intel lacks a strong motive; if it does happen, it would be a disaster for qualcomm.

Qualcomm did not respond to the analysis from Wall Street. According to information from the supply chain, intel confirmed the contact and negotiation with qualcomm, but did not disclose further details.

Compared to intel's current predicament, qualcomm is also not at ease. According to people from the supply chain, qualcomm is also hesitating about its business adjustments, such as the prospects of the chip design business and the relationship with communication patent licensing, and qualcomm's attitude is not very clear.

Currently, from the known information, qualcomm has not formally made an acquisition offer to intel. It is highly likely that this 'external-driven' deal may face significant uncertainties before it is finalized; in addition, this deal is likely to face pressure from antitrust review. If the driving force indeed comes from external sources, then this acquisition cannot be viewed from a conventional business perspective.

The capital markets' attitude toward this news is reflected in the stock prices: as of the close on September 20, qualcomm's stock price fell by 2.87%, while intel rebounded by 3.31% (rebounding as high as 9.46% at one point). This also indirectly reflects the capital's view on this acquisition news and the companies involved, qualcomm in particular.

Editor / jayden