As Qualcomm Aspires to Acquire Intel, Intel Has Options And Can Still Win

HP acquired Compaq, a largely IP-less company, and in the process ran itself down the drain. General Electric (GE) spun out GE Capital,  the company’s one oasis,  and  the nucleus of its large ticket business, and in the process lost its mission. Yes, GE failed to understand that some of the reasons people bought those turbines and machines were partly because GE Capital was funding the acquisition. But when GE Capital was out of the conversation, the core business of GE dried up; I wrote against the spinoff before it was concluded.

Now, we’re reading that Qualcomm was going after Intel: “Qualcomm recently made a move toward acquiring struggling chipmaker Intel, sources cited by CNBC confirmed, marking a potential mega-deal in the technology industry. This news, initially reported by the Wall Street Journal, caused Intel’s shares to jump by 3%, while Qualcomm’s stock fell by a similar margin. If this deal were to materialize, it could become one of the largest technology mergers in history, given Intel’s current market capitalization of over $90 billion.”

Goodness me – that would be an ecclesiastical business marriage. But I am not sure the US regulators would allow such to happen. While everyone wants to save Intel,  this conversation is not wholly about Intel. Yes, TSMC, China and Taiwan are right there on the table, and the US government will decide if Qualcomm can actually run and manage the Intel Foundry business which is strategic for America. 

More so, AMD, and to a large extent Nvidia, may file briefs against that combination. Qualcomm + Intel will be a lethal combo which can rattle many competitors considering the position of Intel in the desktop world and Qualcomm in mobile. The US Government may not want one company to control those two worlds.

Intel is not dead yet, and its position is still better than where AMD was about 18 years ago. With one design, AMD is back and strong. Intel should be fine if it goes ahead to spin out the foundry business so that it can focus on design. The problem with Intel Foundry staying inside and serving only Intel is that if Intel does not have a great design cycle, triggering product demand, the foundry becomes under-utilized. Also, no matter the governance, companies like AMD and NVIDIA may not risk sending their designs to a foundry within Intel. In other words Intel Design + Intel Foundry will not work as I have pointed out for years. There are limited incentives for Nvidia, Apple, AMD, and others to move their businesses from TSMC to Intel Foundry within Intel Corp.

An independent contract foundry is a better business model since statistically you have a higher probability of getting orders since any company which wins on design is your customer. Unlike an internal foundry that is serving only  its internal design unit,  and which can have a poor design cycle, a contract foundry business goes with any winner, and can win head or tail, all the time!

Intel must not sell. Rather, it must spin out Intel Foundry and focus on design. The successes of Nvidia and Broadcom should not make the giant panic; it needs to go back to transistors and craft better designs, because design is where the wins come! But it has to part ways with the foundry business as quickly as possible.

LinkedIn News: Qualcomm has initiated acquisition talks with chipmaking competitor Intel, but an agreement is “far from certain,” The Wall Street Journal reported, citing anonymous sources. With a market value of $93.2 billion, an Intel takeover would be one of the largest tech pacts ever, and the deal would almost certainly draw antitrust scrutiny. Qualcomm’s overture comes at a turbulent time for Intel, which has embarked on turnaround initiatives, including cutting 15% of its workforce. Earlier this week, Intel announced it would create an AI chip for Amazon and spin off its foundry business.

Qualcomm Moves to Acquire Intel, Pushing Its Shares Up

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