What We Can Expect From Potential Qualcomm Acquisition Of Intel
There have been talks over a potential acquisition of $Intel (INTC.US)$ by its rival $Qualcomm (QCOM.US)$
But as of time of this writing, we have not heard any news of Qualcomm making an offer to Intel, however we could expect some significant obstacles as far as a possible deal is concerned, people in the know reportedly said as per The Wall Street Journal.
I am more interested to see with Qualcomm in talks with Intel, what does the future hold for Intel and what are the chances of the deal going through? Will this deal help to boost Qualcomm presence in the PC and server global market?
Intel Struggle With Declining Earnings
In August 2024, when Intel reported a $1.6 billion quarterly loss, on top of that, Intel also announced the jobs cut of around 15,000 jobs.
Intel had seen its shares fall by nearly 40 per cent over the last year. It has a market capitalisation of $93 billion.
If we looked at the recent quarter, Intel have not been able to reached any of previous highs, and it has showed signs of declining earnings.
Intel had failed to capture the market with respect to selling chips for mobile phones and the big boom that had arisen with the advent of Artificial Intelligence.
Arch-rival $NVIDIA (NVDA.US)$ has capitalised on the AI market and has become the most valuable company in the world overtaking Microsoft.
Intel, also, lost its largest customer Apple in 2020 after Apple made its transition from Intel-based processors to making its own M-series chips which are custom-designed and built on the ARM architecture.
Intel's chip manufacturing services, which was once at the forefront of the technology lost out to Taiwan Semiconductor Manufacturing Company (TSMC). It also announced that it would pause the setting up of plants in Germany and Poland.
Qualcomm's Growth Plans
Qualcomm is known for designing and manufacturing semiconductors and wireless telecommunication products. They also produce processors that power up Android smartphones such as Snapdragon processors. It has recently released the Snapdragon X Pus and Snapdragon X Elite chips, known for their AI capabilities and features.
Qualcomm, unlike Intel, does not manufacture its chips and relies on Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung. Getting hold of Intel would be of great advantage to Qualcomm as it hopes to strengthen its presence in the PC and server markets.
if Qualcomm worked with or acquired a portion of intel, it would help the company accelerate its strategy and expand its presence.
And there is a potential increase in Qualcomm market valuation as well, and we should be able to see a better competition in the global chips market.
Can This Deal Help To Reshape The Global Chip Market?
At first glance, it is unclear what Qualcomm has to gain from acquiring Intel. The "Wall Street Journal" revealed over the weekend that the successful chip giant recently approached the struggling Intel with a takeover proposal that would unite the two rivals into a single chip company.
If we were to looked at this new of Qualcomm recently approached the struggling Intel with a takeover proposal that would unite the two rivals into a single chip company, the actual benefit is unclear of what Qualcomm can gain from this acquisition?
Moreover, Qualcomm is one of the big winners of the mobile revolution, with its chips found in almost every device on the market, including Apple’s. Intel, once the world’s largest chip company by market capitalization, is now grappling with crisis after crisis, struggling to turn around its deteriorating situation. Why would Qualcomm want to inherit Intel’s burdens?
That might sound like a strange proposition especially when Qualcomm dominated the AP market with a 36% share in Q1 2024 in terms of revenue. The premium segment drove Qualcomm’s revenue with the launch of the new Snapdragon 8 Gen 3 chipset, while design wins for the Snapdragon 8 gen 2 from Chinese smartphone OEMs added to the revenue.
Apple was the second largest contributor in the AP market in Q1 2024 in terms of revenue with a 33% share. Apple’s revenue declined QoQ due to seasonality. MediaTek captured the third position with a 17% share in the total global smartphone AP/SoC revenues.
MediaTek’s revenue declined QoQ in Q1 2024 due to seasonality and LTE SoC shipments declining significantly in the quarter.
However, growing demand for 5G and the successful ramp-up of the company’s third-generation flagship SoC, the Dimensity 9300, contributed to the overall annual growth in shipments.
However i see this combination to having the potential to shake up the industry, creating a whole greater than the sum of its parts. It could optimize and enhance the operations of both companies, possibly creating a competitor capable of challenging Nvidia's monopoly in the AI chip market.
Furthermore, it could reinvigorate the Biden administration's efforts to position the U.S. as a global chip manufacturing hub—assuming the companies can overcome the complex challenges that accompany such a massive merger.
Can The Deal Materialize?
It would have been unimaginable for a chipmaking rival to buy intel many decades ago. Years of mismanagement and missteps in technology transitions have undermined what was once one of Silicon Valley's formidable companies.
The deal would reportedly be subject to enormous regulatory scrutiny given the mammoth size and national security of both companies.
The biggest hurdle could be both companies facing an antitrust review as Intel's design and manufacturing operations are integral for defence applications and US competitiveness in semiconductors.
It is also uncertain whether the regulators would let Qualcomm acquire Intel without taking over its failing business and it also equally remains to be seen if Qualcomm would want to take on the humongous endeavour.
How We Can Trade Intel On This Potential Acquisition By Qualcomm?
I am more interested to see from the technical whether it would be a good time to trade Intel, even with news helping Intel to move up a bit in its share price, but it is still trading below the short-term and long-term MA considering the multi-timeframe, and the MTF is also showing signs of downtrend.
MACD might be showing promising upside, but we need to understand and monitor and see if it will last until we see a actual talk from Qualcomm on the acquisition?
This might be a phase of due diligence as Qualcomm need to be clear on what they hope to see from this deal.
Summary
Qualcomm might need to make structural changes to Intel if they want to benefit from the deal to boost their market in the PC and server chips, Qualcomm is already leading in the smartphone chips, so in seeking to boost the other side of the chips market, they need to do their due diligence carefully.
I would be monitoring both stocks as there should be more news and development in coming weeks.
Appreciate if you could share your thoughts in the comment section whether you think Qualcomm would benefit more from this acquisition of Intel.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Simon 5183 : Intel can only be sold after the business is split, otherwise Qualcomm's friendly acquisition will violate the antitrust law!
105446847rich Simon 5183 : The usa government supports in the background.
Simon 5183 105446847rich : If usa supports the idea of the big bullying the small to dominate the world, then why have antitrust laws? Don't make sweeping generalizations about everything, don't develop a phobia at the sight of "usa," and don't describe it as an unforgivable scoundrel!