Intel shares rose 3.4% after news of its possible takeover by Qualcomm, which could become the largest deal in the history of the semiconductor industry. However, despite the short-term gains, Intel shares remain down 56% year-to-date. This demonstrates the serious challenges the company continues to face, including loss of technology leadership and falling sales.
Image source: Intel
Intel is going through difficult times. The company has faced falling sales and mounting losses, compounded by a loss of technological advantage. Intel’s market capitalization has fallen to $93.5 billion, which is about half the value of Qualcomm. In an attempt to improve the situation, Intel announced a series of strategic changes, including a multibillion-dollar deal with Amazon to develop an AI chip and a plan to transform its contract chip manufacturing division into a separate subsidiary.
Qualcomm is the world leader in the development of processors for smartphones. The company is actively seeking to expand its presence in other market segments, including chips for personal computers (PCs), Intel’s traditional domain. Unlike Intel, Qualcomm does not have its own manufacturing facilities, relying on outsourcing production to partners such as TSMC, which also makes chips for Intel’s rivals Nvidia and AMD.
A potential acquisition of Intel could give Qualcomm access to U.S. manufacturing capacity and control of a leading brand in the PC and server markets. However, experts believe such a deal would not automatically solve Intel’s problems because Qualcomm lacks manufacturing management experience and expertise in the science behind advanced manufacturing technologies where TSMC excels.
The market reaction to the news was mixed. Qualcomm shares fell 2.9%, reflecting investor concerns about the risks and complexities associated with a potential deal of this size. This situation is reminiscent of events more than six years ago, when Qualcomm itself became the target of a takeover attempt by Broadcom. The deal was then blocked by President Donald Trump due to national security concerns.