Qualcomm’s potential Intel deal raises antitrust and foundry concerns

Qualcomm’s potential acquisition of chipmaker Intel could accelerate its diversification strategy, but it may also burden the smartphone chip giant with Intel’s loss-making semiconductor manufacturing division, Reuters reported on Monday.

If successful, the proposed acquisition would represent the largest ever in the semiconductor manufacturing industry, combining two major players and potentially raising significant antitrust concerns on a global scale.

Shares of Intel saw a 3 per cent rise pre-market, while Qualcomm’s shares plummeted on Monday after Reuters reported Qualcomm was in early-stage discussions for a possible buyout.

Intel has reported mounting losses in its contract manufacturing division, with the arm competing against Taiwan’s TSMC still far from making significant returns. Intel’s market valuation has dropped below $100 billion for the first time in three decades, trailing Qualcomm, which has a market cap of around $190 billion.

The company has been seeking diversification since Chief Executive Cristiano Amon took over in 2021, targeting industries like automotive and PCs beyond the mobile sector, but it remains largely dependent on the struggling mobile market.

Because of that, analysts suggest that adding Intel’s foundry business could be a challenge for Qualcomm, as it does not have enough experience in chip manufacturing to turn the manufacturing business around.

Antitrust hurdles also loom large, as a merger between two chipmakers could result in heightened scrutiny from governments around the world, given the high impact it could have on competitive key markets, including smartphones, personal computers, and servers.

To further complicate the situation, Intel’s strategic importance to US domestic semiconductor production saw Intel receiving around $19.5 billion in federal grants and loans under the CHIPS Act to expand its manufacturing capacity across the US.

Some analysts believe a carve-out of Intel’s foundry business would be potentially more beneficial for the firm rather than a full sale, with reports suggesting that private equity firm Apollo Global Management has offered up to $5 billion for a stake in Intel as well.

Reuters reported earlier this month that Qualcomm had been initially interested in the acquisition of specific Intel assets, including its PC design unit, with plans open to change.

The firm eyed major acquisitions in the past, placing a $44 billion bid to buy NXP Semiconductors in 2016, with the deal failing to secure approval from Chinese regulators.