Another day, another rumour of an aborted Intel buyout. Earlier this week it was Qualcomm that was said to be sniffing around the injured, wheezing chip maker. Today, it's none other than Arm, in some ways Intel's biggest competitor.
Business outlet Bloomberg reckons that Arm knocked on Intel's door offering to buy the product half of the company. In other words, the bit of the company that designs the chips and not the foundry or manufacturing facilities.
Apparently, Intel told Arm to jog on. The company isn't for sale. Now, it's impossible to say if this actually happened. But it's not hard to understand why stories like this are emerging.
No question, Intel is in trouble. It's losing money hand over fist. Its foundry arm has been struggling for well over a decade. Intel has even suffered the ignominy of the crashing 13th and 14th Gen CPU debacle, calling into question basic competence over the company's core product line.
The question, then, is could a buyout happen? Our own Nick argued that if Nvidia wasn't allowed to buy Arm, then Qualcomm buying Intel is a non starter. And so from that it would follow that anti-trust in the US wouldn't allow Arm to buy Intel's product division.
In broad terms, I think that's only half correct. Arm probably wouldn't be allowed to by Intel. But Qualcomm might. How so? First, Intel is a US company of strategic importance. The US is very keen to have its own domestic cutting-edge chip design and manufacturing capabilities and Intel is the leading US player in that market, particularly on the manufacturing side. Second, Intel is currently experiencing an existential crisis. Even the company's own CEO says he has bet the company on the upcoming 18A process node.
Anyway, those two factors put a completely different spin on any acquisition of Intel, as opposed to an acquisition of Arm by, say, Nvidia. US anti-trust authorities will have to balance off the risk of allowing too much power and too large a product portfolio to accumulate in any new entity that contains Intel with the risk of Intel as we know it ceasing to exist.
Put another way, if the judgement is that Intel is at significant risk of going broke if it isn't acquired, then much more flexibility is likely to be shown by the relevant authorities when it comes to suitors knocking at the door. They'd much rather run the risk of creating something of a monopoly than see Intel go out of business. That would be a disaster.
The catch is that the same worries over Intel's future and its role as an important strategic asset for the US as a whole means the main concern in any buyout is likely to be nationality of any new owner rather than the risk of anti-trust.
Would the US be happy with Arm buying half of Intel? Arm's majority shareholder is Japanese investment company Softbank. Japan is a close ally of the US. But it isn't the US. Arm is also headquartered in the UK. So, a bid by Arm may not be viewed positively. On the other hand, Qualcomm is a US company and so a Qualcomm buyout would keep Intel fully domesticated. Perfect.
Right now, Intel is a much larger company than Qualcomm, with around 2.5 times the employees and over 50% more revenue. On the other hand, Qualcomm's current total worth or market cap is $192 billion, while Intel's is just $102 billion, reflecting market fears over Intel's future prospects.
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Perhaps the greater doubt is whether Qualcomm would want to take on all of Intel, rather than just the product side. Perhaps a case could be made for Qualcomm buying the product business and pumping all that capital into the newly independent fabs. Maybe add in a clause that Qualcomm has to keep using Intel Foundry for x86 chips for a while to give that money a little time to work its magic.
Anyway, the overarching conclusion here is that it's hard to say for sure if anyone has actually taken a serious look at buying Intel. Moreover, Intel probably isn't at risk of failure in the short term.
But the company is already in sufficient trouble that the usual concerns over anti-trust will not fully apply. Instead, they'll be balanced against the medium term risk that Intel goes to the wall. My personal hunch is that Intel will in whole or substantial part be under new ownership inside a decade. It wouldn't surprise me at all if the name over the door at that point is Qualcomm. Watch this space.
