According to the latest news, Qualcomm CEO Cristiano Amon personally participated in the negotiations to acquire Intel, studying various options for the deal. Informed sources warn that the uncertainty of this acquisition deal is very high at the moment, and even if Intel is willing to accept, such a large-scale transaction would almost certainly face antitrust scrutiny.

Analysts point out that if Qualcomm's acquisition of Intel deal ultimately succeeds, it will become one of the largest technology M&A deals in history, with Intel's total market value reaching $93.388 billion, which may lead to a significant shift in the global PC chip market competition landscape.

Currently, Intel is standing at a critical crossroads, affected by the performance debacle, with Intel's stock price plummeting by 56% year-to-date. At the same time, Intel is actively brewing a 'self-rescue' plan, including layoffs, divesting its chip manufacturing department, splitting product design and manufacturing operations, and cutting down on factory investment projects.

Chip heavyweight

According to sources cited by The Wall Street Journal, US Qualcomm has recently been in contact with Intel regarding the acquisition. Stimulated by this news, Intel's stock price surged over 9% intraday on Friday, while Qualcomm's stock price plummeted over 5% at one point. By the close, Intel was up 3.31%, and Qualcomm was down 2.87%.

According to the latest news from Reuters, Qualcomm CEO Cristiano Amon personally participated in the negotiations to acquire Intel, studying various options for the deal. However, negotiations between Qualcomm and Intel are still in the early stages, and Qualcomm has not yet made a formal bid for Intel.

Regarding the acquisition rumors, representatives from Intel and Qualcomm have both declined to comment.

Insiders warn that the negotiations have taken place in recent days, and the uncertainty of this acquisition deal is very high at the moment. Even if Intel is willing to accept, such a large-scale transaction will almost certainly face antitrust scrutiny. However, the deal could also be seen as an opportunity to enhance the United States' competitive advantage in the chip sector. To complete the transaction, Qualcomm may intend to sell Intel's assets or part of its business to other buyers.

Analysts point out that if Qualcomm's acquisition of Intel is successful, it will become one of the largest technology mergers in history. Currently, Intel's total market value is $93.388 billion, compared to around 660 billion RMB. Microsoft, on the other hand, spent about $69 billion when acquiring Activision Blizzard.

It should be noted that Qualcomm's core business mainly focuses on smartphone chips, firmly controlling a market share of high-end smartphone chips. In the second quarter of 2024, Qualcomm held a 31% market share of chip shipments. However, in recent years, it has been continuously launching attacks in the PC market.

Qualcomm recently announced that its Snapdragon X Plus 8-core processor adopts ARM architecture, claiming that the processor is specifically designed for PCs priced as low as $700, performing excellently in energy efficiency and battery life. Qualcomm has also established an exclusive partnership with Microsoft, where Copilot+PC is equipped with Qualcomm's X series chips.

Analysts believe that Qualcomm's rise may signify a significant shift in the PC chip market landscape, with innovations focusing on AI PCs becoming more competitive. If Qualcomm successfully acquires Intel, it could lead to a major change in the global PC chip market competition landscape.

However, the difficulty of Qualcomm's acquisition of Intel remains very high at present, with two main challenges:

Firstly, Qualcomm's available funds are temporarily insufficient for the acquisition of Intel. Qualcomm's financial report shows that as of June 23, 2024, Qualcomm's cash and cash equivalents amounted to only $7.77 billion, with $5.26 billion in marketable securities. This means that Qualcomm's total short-term available funds amount to $13.03 billion. Analysts say that if the acquisition proceeds, Qualcomm's cash and securities are far from enough to acquire Intel unless other methods like stock swaps or institutional loans are employed.

Secondly, Qualcomm and Intel's businesses span major markets worldwide, including the United States, Europe, and China. Engaging in such a large-scale acquisition would require approval from antitrust regulators in various countries. Antitrust reviews often last more than six months, and any veto by regulatory authorities in any country or region could lead to the failure of the acquisition. In recent years, both Broadcom's bid for Qualcomm and Nvidia's bid for ARM were forced to be canceled under national security and antitrust pressure.

Renowned analyst Ming-Chi Kuo of TF International Securities stated that the acquisition of Intel would only benefit Qualcomm's AI PC chip business. However, considering Microsoft's commitment to Windows on ARM (its latest Surface models all use Qualcomm processors/ARM architecture), Qualcomm's growth in the PC market is just a matter of time. This acquisition would put extreme financial pressure on Qualcomm and immediately impact its profit margins, potentially dropping the net margin from the current 20%+ to single digits or even a loss (foundry business being the biggest burden). Furthermore, taking into account the subsequent antitrust investigations in various countries, it seems unlikely that this acquisition will be completed in the short term. Therefore, if this acquisition were to happen, it could be considered a disaster for Qualcomm.

Intel's moment of life and death.

On the other hand, Intel is currently deeply embroiled in the biggest crisis since its inception, standing at a crucial crossroads of life and death.

Intel was once the world's largest chip manufacturer, but in recent years, its business situation has been deteriorating, showing an accelerated decline in 2024. In August of this year, it released a disappointing financial report, referred to by analysts as 'the worst earnings report ever.' This directly led to the largest single-day drop in the company's stock price in over 50 years, with a cumulative decline of 56% so far this year.

At the same time, Intel also announced plans to lay off 0.015 million people, accounting for over 15% of its total workforce, and to suspend dividends starting from the fourth quarter of this year for the first time since 1992.

Currently, Intel is actively brewing a 'self-rescue' plan, which includes splitting its product design and manufacturing business and cutting back on factory investment projects. Morgan Stanley and Goldman Sachs, long-term partners of Intel, are providing comprehensive strategic advice, including potential acquisitions.

Recently, Intel's CEO Pat Gelsinger outlined cost-cutting measures in a memo to employees. These measures include suspending factory projects in Germany and Poland; considering pulling out of its chip packaging and testing business in Malaysia; streamlining and simplifying the x86 product portfolio; and reducing or exiting two-thirds of global offices by the end of this year.

Intel had previously committed to investing $36 billion in building chip factories in Germany, $4.6 billion in building chip factories in Poland, and $7 billion in setting up factories in Malaysia.

Cost reduction is a core component of intel's operation, as Intel plans to spin off its chip outsourcing department into an independent subsidiary and add a new board of directors. Gelsinger stated that after the business is spun off, it can evaluate independent sources of funding and introduce external financing.

According to the forecast data previously released by Intel, after the separation of wafer manufacturing business, it can save $3 billion in costs in 2023, and will save $8 billion to $10 billion in costs by 2025.

According to Gelsinger, this is the most important transformation for Intel in over forty years, he hopes to use this opportunity to build a stronger Intel in the coming decades.

Intel will release two products, Lunar Lake and Panther Lake, in the future. The market is watching closely to see if this will be Intel's final opportunity.

Editor/Lambor