Summary Bullets:

• Qualcomm and Intel are big players in delivering the semiconductors that are used worldwide every day.

• There are significant financial considerations as to how Qualcomm could possibly finance a purchase as large as Intel.

Recently, it’s been reported that Qualcomm is in the early stages of negotiations to buy out Intel. Intel has been suffering from disappointing financial performance and has been restructuring the company as well as opening its fabrication plants to third parties. Intel has recently announced that it will be separating its fabrication business from the rest of Intel as part of its reaction to continued poor financial performance. Its recent travails have in part been caused by its being late to the party for chips designed for use in AI systems (more specifically GPUs), unlike chip rival Nvidia. Intel has also suffered from competition from long-time rival AMD in both the desktop and server market.

Intel stock has dropped approximately 34% in the last year, and approximately 55% in the last five years. Intel’s trials and tribulations have been making headlines for the last few years but have been ramping up recently, despite Intel seeking to take advantage of US government support for chip manufacturing on US soil to be increased. Intel has recently paused construction of new chip foundries outside the US, including in Germany. These discussions with Qualcomm are supposedly in the early stages – nothing concrete has been reported. Qualcomm has developed and holds some of the key patents for the cellular CDMA standard, which is in widespread use today. Qualcomm also holds key patents relating to 5G. Qualcomm Snapdragon ARM-based processors and its cellular modems are used in most cell phones today. Qualcomm also has automotive, laptop, and WiFi products available, among others. In terms of revenue, Qualcomm is the number six semiconductor company in the world, and Intel is number four. Both companies have staggering and ever-expanding patent portfolios.

In short, both companies are big players in delivering the semiconductors that are used worldwide every day in common products such smartphones, cars, audio, PCs, servers, and AR/VR applications. There are significant financial considerations as to how Qualcomm could possibly finance a purchase as large as Intel. But the real problem here would be around giving one company control of so many important technology products and intellectual property.

A takeover of this kind would attract significant attention from regulators in the US and globally. Qualcomm’s past behavior is not encouraging in this regard. Qualcomm has been subject antitrust scrutiny in the EU and the US. Qualcomm has a reputation for being litigious with its patents, but also for charging high prices for the use of those patents and making licensing deals that perpetuate its position in the market. Allowing Qualcomm and Intel to merge would not solve Intel’s problems, leave the resulting company with a mountain of debt, and represent a significant consolidation of technologies into the hands of one company.

Let’s hope that these early talks are all that happens, for everyone’s sake.