An article in the Wall Street Journal (WSJ) reported information that could lead to changes in the global smartphone supply chain if it turns out to be true.
According to the article, Qualcomm is interested in acquiring Intel and has approached the company with a deal that would value it at more than $93 billion. In fact, if successful, Qualcomm's acquisition would certainly surpass the $100 billion mark.
Qualcomm's San Diego headquarters is known as a state-of-the-art chip design lab, although it has to use third-party foundries for manufacturing because it doesn't own any fabrication facilities.
Qualcomm has previously partnered with manufacturers like TSMC and Samsung Foundry to produce Snapdragon components. Qualcomm sells Snapdragon application processors that help smartphones process and complete tasks, and its modem chips that connect smartphones to the Internet.
Intel, once the world’s most valuable chipmaker, has now fallen behind Qualcomm, Broadcom, Texas Instruments, and AMD. Last month, Intel even announced plans to lay off thousands of employees and suspend its dividend. Intel shares have fallen as much as 54% since the start of the year, while Qualcomm shares have risen 20.5%.
Following the WSJ article, Intel shares ended the week at $21.84, up 3.31% on the day. Qualcomm shares moved in the opposite direction to Intel, falling just before the close, down 2.87% to $168.92.
Intel, on the other hand, is also trying to win chip manufacturing contracts for companies that don’t have factories. To put pressure on the negotiations, Qualcomm has temporarily stopped requiring Intel to manufacture certain chips, making it unable to generate enough business to put more money into the project.
Some have suggested splitting the company into two, one focused on chip design and the other on chip manufacturing, but this may not be possible immediately because Intel's manufacturing unit is losing money and, apart from manufacturing chips for Intel itself, the company has yet to create a steady stream of customers for its chip manufacturing operations.
The largest tech acquisition ever was Microsoft’s $69 billion purchase of Activision Blizzard, which closed last year. Qualcomm’s acquisition of Intel would certainly set a new record, but records aren’t what Qualcomm wants to do.
The point here is that the company will likely gain control of the factories that Intel plans to use for its contract foundry business, and Qualcomm will be able to manufacture its own smartphone chips without having to worry about Samsung Foundry's output or TSMC's prices.
