Qualcomm has reportedly considered acquiring segments of Intel’s chip design business, according to a Reuters report citing two undisclosed sources privy to the details. The potential acquisition is seen as part of Qualcomm’s broader strategy to expand beyond its core strength in mobile chips, focusing on personal computers and artificial intelligence.
Qualcomm’s assessment of this possible deal remains in the preliminary stages, with no final decisions made and no formal approach to Intel yet.
Sources indicate that Qualcomm is particularly interested in Intel’s client PC design business. This segment, which focuses on chips for laptops and desktops, aligns with Qualcomm’s strategy to diversify its chip portfolio and capitalise on the AI-driven future of personal computing. In contrast, other Intel segments, such as the server chip design unit, appear to be of less interest.
Intel in decline?
For its part, Intel has been grappling with a series of challenges in recent years, including a decline in market share in both consumer and enterprise segments. Once a dominant force in the semiconductor industry with its “Intel Inside” marketing campaign, Intel has struggled to maintain its leadership amidst growing competition from companies like Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing Company (TSMC).
In 2023, Intel’s client PC business reported an 8% revenue drop to $29.3bn, reflecting broader market downturns.
Adding to its woes, Intel’s manufacturing plans have come under pressure. Traditionally known for its in-house chip production, Intel has increasingly outsourced to companies like TSMC. The launch of Intel’s “Lunar Lake” chips, designed for AI applications, is a recent example where significant production was outsourced to the Taiwanese semiconductor giant. Amid these challenges, Intel has resorted to workforce reductions, with a 15% cut, and the suspension of dividend payments to manage costs and conserve cash.
Looking to stabilise its position, Intel CEO Pat Gelsinger, along with top executives, is expected to present a new strategic plan to the board this month. The strategy, as reported by Reuters, involves selling non-core units, such as the programmable chip unit Altera, which Intel acquired for $16.7bn in 2015, and scaling back capital expenditures.
The plan may include pausing or cancelling a $32bn factory project in Germany. Concerns are growing over Intel’s standing in the Dow Jones Industrial Average, given a nearly 60% drop in its stock this year driven by missed AI opportunities and manufacturing delays. Some analysts even suggest Intel could be replaced by companies like Nvidia or Texas Instruments.
Intel’s financial troubles were underscored in August 2024, when the company reported a $1.65bn loss for Q2, a stark contrast to the $1.47bn net income from the previous year. Net revenue also declined slightly to $12.83bn from $12.95bn in Q2 2023.
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