Qualcomm is eyeing Intel as a possible acquisition target but has hit the brakes on any moves until after the upcoming US election. The chipmaker wants to avoid regulatory uncertainty before diving into such a massive purchase, as the political situation could play a major role in how the deal plays out.
Political Factors at Play
With the US election around the corner, Qualcomm is carefully watching how the new administration could impact antitrust policies. According to Bloomberg, the company wants to make sure it doesn’t run into roadblocks from regulators once the political dust settles. The stance on mergers, especially those involving huge tech players, is expected to shift depending on the winner of the election.
The Biden administration has shown a willingness to scrutinize and block significant M&A transactions, employing aggressive new guidelines that lower thresholds for what constitutes anti-competitive behavior. Conversely, a potential return of Donald Trump could lead to a more lenient regulatory environment, which might encourage more aggressive M&A activity among tech giants
This isn’t just about US regulators though — China is also in the mix. Qualcomm has already reached out to Chinese officials to gauge their take on a possible merger. The deal also carries weight for the US government’s domestic chip production goals. Intel is a crucial part of Washington’s push to boost US chipmaking capabilities.
Under the 2022 Chips and Science Act, Intel stands to get up to $8.5 billion to help ramp up manufacturing stateside. Given how closely Intel is tied to the US’s plans to cut reliance on foreign chips, this acquisition could draw even more scrutiny.
Don’t know how aggressively $QCOM is pursuing $INTC, but to the extent that they’re considering a buyout offer, I’m guessing a few things are at play:
1) Assuming Qualcomm is mostly interested in Intel’s core chip design businesses, there are a bunch of things they can spin off…
— Eric Jhonsa (@EricJhonsa) September 21, 2024
Intel’s Overhaul and Market Struggles
Intel itself has been going through some major changes. The company, under CEO Pat Gelsinger, is in the middle of a large-scale overhaul as it aims to recover ground it’s lost in recent years to competitors.
It’s also dealing with a significant drop in stock price, which has plummeted by 37% over the past year, bringing its market value to around $93 billion. The decrease might make it an attractive target for Qualcomm, which could benefit from buying either the whole company or select parts of it.
In September, Intel reorganized its foundry business into a separate subsidiary, Intel Foundry, to attract outside investment and address financial concerns. Intel officially introduced its semiconductor manufacturing division under a new name, Intel Foundry, in February. positioning itself as the pioneer systems foundry tailored for the artificial intelligence (AI) era. Microsoft has become as the inaugural client of Intel Foundry.
The proposed reorganization is intended to mitigate significant financial challenges, particularly the substantial decline in stock value, which has reached approximately 60% over the current year. By establishing the foundry division as an independent entity with its own governing board, the organization seeks to streamline the process of securing external financing.
Regulatory Concerns
Behind the scenes, Qualcomm CEO Cristiano Amon has been leading discussions about what form a potential acquisition might take. While no official offer has been put on the table yet, Qualcomm has been weighing its options and making sure it’s prepared to act once the political environment is clearer.
Qualcomm has been working to smooth the path ahead by framing the potential acquisition as a purely American deal. By emphasizing that both companies are US-based, the company hopes to avoid some of the challenges that derailed similar deals in the past. A notable example is Broadcom’s failed $142 billion bid to buy Qualcomm in 2018, which the US government blocked due to national security concerns. Qualcomm is keen to sidestep these issues this time around.
Last Updated on November 7, 2024 2:32 pm CET
