Global chip event!
According to the latest news, Cristiano Amon, CEO of Qualcomm, personally participated in the negotiation of acquiring Intel and studied various options for the transaction. A person familiar with the matter warned that the uncertainty of this acquisition transaction is so great that even if Intel is willing to accept it, such a large-scale transaction will almost certainly be subject to antitrust review.
Analysts pointed out that if Qualcomm’s acquisition of Intel is finally successful, it will become one of the largest technology mergers and acquisitions in history, and Intel’s total market value is as high as 93.388 billion US dollars (about 660 billion yuan), which may lead to a major change in the competitive landscape of the global PC chip market.
At present, Intel is standing at the crossroads of life and death. Due to the thunder of performance, Intel’s share price has fallen by 56% during the year. At the same time, Intel is actively planning a plan to "save itself", which includes layoffs, divesting its chip foundry department, splitting product design and manufacturing business, and reducing factory investment projects.
Heavy chip
According to the Wall Street Journal, citing people familiar with the matter, Qualcomm recently approached Intel about the acquisition. Stimulated by this news, Intel’s share price soared by over 9% in intraday trading on Friday, and Qualcomm’s share price plummeted by over 5%. At the close, Intel rose by 3.31% and Qualcomm fell by 2.87%.
According to the latest news from Reuters, Cristiano Amon, CEO of Qualcomm, personally participated in the negotiations to acquire Intel and studied various options for the transaction. However, the negotiations between Qualcomm and Intel are still in the early stage, and Qualcomm has not yet made a formal offer for Intel.
Representatives of Intel and Qualcomm declined to comment on the acquisition rumors.
People familiar with the matter warned that the negotiations were held in recent days, and the uncertainty of this acquisition transaction is very large at present. Even if Intel is willing to accept it, such a large-scale transaction will almost certainly be subject to antitrust review. But the deal may also be seen as an opportunity to enhance the competitive advantage of the United States in the chip field. In order to conclude the transaction, Qualcomm may intend to sell Intel’s assets or part of its business to other buyers.
Analysts pointed out that if Qualcomm’s acquisition of Intel is finally successful, it will become one of the biggest technology mergers and acquisitions in history. At present, Intel’s total market value is 93.388 billion US dollars (about 660 billion yuan), compared with Microsoft’s previous acquisition of Activision Blizzard, which cost about 69 billion US dollars.
It should be pointed out that Qualcomm’s core business is mainly smart phone chips, which firmly controls the market share of high-end mobile phone chips. In the second quarter of 2024, Qualcomm’s chip shipments accounted for 31%, but in recent years, it has been attacking the PC market.
Qualcomm recently announced that its Snapdragon X Plus 8-core processor adopts ARM architecture, saying that the processor is designed for PCs with a price as low as $700, and it has excellent performance in energy efficiency and battery life. Qualcomm has also established an exclusive partnership with Microsoft, and Copilot+ PC is equipped with Qualcomm X series chips.
Analysts believe that the rise of Qualcomm may mark a major change in the market structure of PC chips, and innovation focusing on artificial intelligence PCs will be more competitive. If Qualcomm succeeds in acquiring Intel, it may lead to a major change in the competitive landscape of the global PC chip market.
But at present, it is still very difficult for Qualcomm to acquire Intel. The two main difficulties are:
First, it is difficult for Qualcomm’s book funds to acquire Intel for the time being. Qualcomm’s financial report shows that as of June 23, 2024, Qualcomm’s cash and cash equivalents were only US$ 7.77 billion and securities were US$ 5.26 billion. This means that Qualcomm’s short-term available self-owned funds totaled $13.03 billion. Analysts said that if the merger is opened, Qualcomm’s cash and securities are far from enough to acquire Intel, unless other ways such as equity swap and institutional borrowing are adopted.
Second, the businesses of Qualcomm and Intel are spread all over the world’s major markets such as the United States, Europe and China. Once such a large-scale acquisition is started, it needs to be reviewed and approved by the anti-monopoly regulatory authorities of various countries. Anti-monopoly review often lasts for more than half a year, and mergers and acquisitions may fail if the regulatory authorities of any country or region veto it. In recent years, Broadcom’s offer to Qualcomm and NVIDIA’s offer to ARM were both cancelled under the pressure of national security and anti-monopoly.
Guo Ming Tan, a well-known analyst at Tianfeng International, said that the acquisition of Intel will only help Qualcomm’s AI PC chip business. However, from Microsoft’s commitment to WoA (its latest Surface models all adopt Qualcomm processor /ARM architecture), it is only a matter of time before Qualcomm grows up in the PC market. This merger will exert great financial pressure on Qualcomm, and it will have an immediate negative impact on profitability. The net interest rate may drop from the current 20%+ to single digits or even lose money (wafer foundry business is the biggest burden). In addition, considering the anti-monopoly investigations in various countries, it is difficult to complete this merger in a short time. So, if this merger happens, it will be a disaster for Qualcomm.
Intel’s moment of life and death
On the other hand, Intel, which is deeply mired in the biggest crisis since its establishment, is standing at the crossroads of life and death.
Intel used to be the world’s largest chip manufacturer, but its business situation has gone from bad to worse in recent years, and it showed an accelerated decline in 2024. In August this year, it released a financial report that disappointed the market, which was called "the worst earnings report ever" by analysts. This directly led to the biggest one-day decline in the company’s share price in more than 50 years. Up to now, the cumulative decline during the year has reached 56%.
At the same time, Intel also announced that it will lay off about 15,000 people, accounting for more than 15% of the company’s total employees, and suspend dividends from the fourth quarter of this year, which is the first time since 1992.
At present, Intel is actively planning a plan to "save itself", which includes splitting its product design and manufacturing business and cutting down factory investment projects. Morgan Stanley and Goldman Sachs are long-term partners of Intel, and they are providing them with all-round strategic advice, including potential mergers and acquisitions.
Recently, Pat Gelsinger, CEO of Intel, outlined the planned cost-cutting measures in a memo to employees. These measures mainly include: Intel will suspend factory projects in Germany and Poland; Consider withdrawing its chip packaging and testing business in Malaysia; Streamline and simplify the x86 product portfolio; By the end of this year, two-thirds of the global offices will be reduced or withdrawn.
Intel previously promised to spend $36 billion to build a chip factory in Germany, $4.6 billion to build a chip factory in Poland and $7 billion to build a factory in Malaysia.
As a core component of Intel’s cost-cutting measures, Intel plans to split its chip foundry department into an independent subsidiary and add an operating board. Gelsinger said that after the business is independent, it can evaluate independent sources of funds and introduce external financing.
According to the forecast data released by Intel, after the spin-off of wafer manufacturing business, the cost will be saved by $3 billion in 2023 and $8 billion to $10 billion in 2025.
According to Gelsinger, this is the most important transformation of Intel in more than 40 years, and he hopes to use this opportunity to build a stronger Intel in the coming decades.
Intel will release two products, Lunar Lake and Panther Lake, and the market is waiting to see if this will be Intel’s last chance.
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