Track Hyper | What's the picture of Qualcomm's acquisition of Intel?

Author: Zhou Yuan / Wall Street News

"Is this possible? What is Qualcomm trying to do?" On September 21st, a semiconductor industry practitioner told Wall Street News, "Is this fake news?" When he learned about the authenticity of this matter, this senior professional said, "Unbelievable, these two companies lack a basis for merging in terms of business scope."

What surprised this individual so much originated from a very brief industry information: According to informed sources, chip giant Qualcomm recently expressed its intention to acquire its competitor Intel.

The media reported that 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 deal can be successfully completed, Qualcomm's business scope can expand.

For example, in recent years, Qualcomm has taken advantage of the GenAI wave and launched Arm-based laptop chips - Snapdragon 8CX (launched in 2018) and Snapdragon X Elite (released on October 25, 2023). The latter has become Qualcomm's weapon for attacking laptops.

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

The Microsoft Surface series is a benchmark for high-end laptops in the Windows camp, representing Microsoft's understanding of the laptop form factor on the largest software platform.

Subsequently, laptop terminal companies represented by Lenovo have launched new laptop models, all equipped with Qualcomm Snapdragon chips, claiming to enter the era of AI laptops. The Snapdragon X Elite uses heterogeneous computing, integrating Oryon CPU, Adreno GPU, and Hexagon NPU, with a computing power of 45 Tops.

The Hexagon processor is a high-performance AI hardware acceleration unit designed for high-computing AI workloads. Considering the usage scenarios of PCs as computing platforms, the Snapdragon X Elite also integrates an independent Sensing Hub. This hub contains Micro NPU, ISP, DSP, and independent memory units.

This means that this chip can directly execute 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 capabilities of Qualcomm's AI engine.

If Qualcomm does indeed acquire Intel, the biggest benefit would be to leverage Intel's ubiquitous chip technology and market advantage in personal computers (PCs) and servers to improve Qualcomm's smartphone chip business in the gradual stock stage.

Many domestic semiconductor industry professionals told Wall Street News, "Qualcomm is unlikely to include Intel's IFS business in the acquisition, as the cost is too high and it does not benefit Qualcomm's main business. Qualcomm's most likely approach is to exclude IFS, acquire other assets, especially PC chip design assets." However, several semiconductor professionals have pointed out that Qualcomm's acquisition of Intel may not bring direct benefits from a business perspective. Even in the AI PC chip business, there is no direct overlap between Intel's x86 architecture chips and Qualcomm's Arm architecture chips, leading to contradictions in product logic and performance.

How will Qualcomm address this issue? And how will it be resolved?

Analyst Ming-Chi Kuo from TF International Securities believes that firstly, the acquisition of Intel will only benefit Qualcomm's AI PC chip business. However, with Qualcomm's collaboration with Microsoft, Qualcomm's growth in the PC market is only a matter of time.

Secondly, despite Intel's stock price falling by over 60% this year, its market value is still around $93 billion. Therefore, Qualcomm's financial pressure to acquire Intel would be unbearable, leading to an immediate negative impact on Qualcomm's profitability. Qualcomm's net profit margin may drop from the current 20%+ to single digits or even losses.

Therefore, Ming-Chi Kuo believes that Qualcomm's acquisition of Intel lacks a strong motivation; if it does happen, it could even be a disaster for Qualcomm.

Qualcomm has not responded to requests for comments from Wall Street News. According to information obtained from the supply chain, Intel has confirmed the contact and discussions with Qualcomm, but no further details have been disclosed.

Compared to Intel's current predicament, Qualcomm is also facing challenges. Supply chain sources revealed that Qualcomm is also hesitant about adjusting its own business, such as the prospects of chip design business and its relationship with communication patent licensing. Qualcomm's stance is not yet clear.

Currently, based on the known information, Qualcomm has not formally made a takeover offer to Intel. Whether this "externally driven" transaction can eventually materialize remains uncertain; furthermore, this transaction is likely to face pressure from antitrust reviews. If the driving force indeed comes from external sources, this acquisition cannot be viewed from a conventional business perspective.

The capital market's reaction to this news is reflected in stock prices: as of the close of September 20th, Qualcomm's stock price fell by 2.87%, while Intel rebounded by 3.31% (at one point, it rebounded by as much as 9.46%). This also indirectly reflects the market's attitude towards this acquisition news and Qualcomm's involvement, but the true implications remain to be seen