On September 21, the Wall Street Journal broke the news that Qualcomm had recently issued an acquisition offer to Intel and approached Intel about the acquisition. Subsequently, the CNC also confirmed the news.

On the news, Intel's stock price rose sharply, and when the stock price reached a high of $23.12, it rose nearly 9.4% on the day. Qualcomm's intention to acquire part of Intel's business will undoubtedly have a profound impact on this decades-long competitive landscape.

It is worth noting that given the huge scale of the two chip manufacturers, if the two parties are to make a deal, it is very likely to cause strict anti-monopoly review, which means that there is a great obstacle to reaching a deal.

Intel is facing its biggest transformation in more than 40 years

At the beginning of August, Intel released its financial report for the second quarter of fiscal year 2024, showing that the company's revenue reached $12.8 billion, down about 1% from the same period last year, and showed a net loss of about $1.6 billion, compared with a net profit of about $1.5 billion in the same period last year, and the performance turned from a profit to a loss. To address this challenge, Intel has also unveiled a layoff plan aimed at cutting costs.

In the early morning of September 17, Beijing time, Intel CEO Pat · Gelsinger sent an internal letter to all employees, detailing the company's strategic adjustment under the current situation. Key measures include converting the foundry business into an independently operated subsidiary, suspending construction of new factories in Germany and Poland, while continuing to advance plant construction in the United States, and emphasizing the need to fully exploit the potential of the X86 architecture.

Kissinger also announced a further strategic partnership with Amazon, where the two companies will jointly invest in the design and development of custom chips. Under the new agreement, Intel's foundry business unit will use Intel's 18A process to manufacture AI chips for Amazon, and build on the existing cooperation base to produce customized Xeon processors using Intel3 process for Amazon. In addition, the two companies plan to work more closely on Intel's 18A, 18AP and 14A technology nodes.

"This is the largest transformation we've experienced in 40 years, and it's never been such a significant shift since we moved from the memory business to microprocessors," Kissinger said. We succeeded that time—and this time, we're up to the challenge of building a stronger Intel for decades to come." ”

Although Intel has taken a series of aggressive business restructuring measures, analysts believe that as a traditional semiconductor industry leader, Intel still faces many problems that need to be solved urgently.

Qualcomm is constantly attacking the PC market

Today, Qualcomm and Intel compete in a number of key markets, including PCs and automobiles, but their business models are very different. Intel, as an IDM (Integrated Equipment Manufacturer), is responsible for the design and production of chips; Qualcomm, on the other hand, is a fabless company that focuses on chip design and relies on third-party vendors like TSMC and Samsung to produce its products. If Qualcomm can acquire Intel, it will significantly increase its manufacturing capabilities, which in turn will reshape the competitive dynamics of the foundry industry.

In addition, in the field of computer hardware, X86 and ARM are the two mainstream CPU architectures. The x86 architecture (i.e., CISC, Complex Instruction Set Computing) is primarily used to serve the PC and server markets; The ARM architecture (which stands for RISC, Reduced Instruction Set Computing) dominates the field of mobile devices. For a long time, Qualcomm has focused on the research and development of ARM-based chips, while Intel has dominated its X86 architecture, which has occupied more than 90% of the data center market. If Qualcomm succeeds in acquiring the business related to the x86 architecture, it will be able to occupy a leading position in both mobile and PC segments.

Recently, Qualcomm announced its Snapdragon X Plus The 8-core processor uses the ARM architecture, which is designed specifically for PCs starting at $700 and excels in terms of energy efficiency and battery life. In addition, Qualcomm has entered into an exclusive partnership with Microsoft to launch Copilot+ with Qualcomm X-series chips PC, while Intel and AMD have not yet ventured into this area.

"This puts Qualcomm ahead of the curve for a couple of quarters." Mario, Vice President, Support Technology and Semiconductor Group, IDC Morales commented, "However, despite Qualcomm's early lead, it's still a marathon race in the long run. ”

Earlier this year, Microsoft unveiled a new generation of Surface laptops powered by Qualcomm's ARM chip, which even outperformed the new MacBook with Apple's M3 chip in some performance tests, demonstrating the strong competitiveness of the ARM architecture in the PC field.

Acquisitions between giants often face difficulties in anti-monopoly review

If Qualcomm successfully acquires Intel, it will undoubtedly significantly enhance the competitive advantage of United States in the chip industry. However, such a huge acquisition is fraught with uncertainty, and even if both parties have a strong intention to merge, they will have to face strict antitrust scrutiny. Historically, a number of large-scale mergers and acquisitions in the semiconductor industry have not been completed as expected.

For example, Qualcomm's acquisition of NXP Semiconductors ended at the end of July 2018 without approval from China's State Administration for Market Regulation, and the acquisition attempt lasted for 21 months. NXP, one of the world's leading semiconductor manufacturers, became the largest supplier of MCUs (microcontrol units) and automotive chips with the acquisition of Freescale. Therefore, if Qualcomm successfully completes the acquisition of NXP, it will extend Qualcomm's business scope to automotive electronics, identification, radio frequency and other fields.

Similarly, in 2021, Nvidia's proposed acquisition of Arm was blocked by the United States Federal Trade Commission due to antitrust concerns, and was finally aborted in 2022.

In light of this, it remains to be seen whether the potential merger between Qualcomm and Intel can proceed smoothly.