By Max A. Cherney
SAN FRANCISCO (Reuters) -Qualcomm has approached Intel (NASDAQ:) in recent days to explore a possible takeover of the troubled chipmaker, a source familiar with the situation said on Friday, in what could be a transformational deal in the sector could be, but many face obstacles.
Qualcomm (NASDAQ:) CEO Cristiano Amon is personally involved in negotiations to acquire five-decade-old Intel, according to the source briefed on the matter. Another person familiar with the situation said Amon has been actively exploring various options for a deal for the company.
Earlier this month, Reuters reported that Qualcomm was exploring the possibility of acquiring parts of Intel’s design business and that its PC design division was of particular interest. Qualcomm executives examined Intel’s entire portfolio of businesses.
Discussions with Intel are at an early stage. The San Diego-based company has not made a formal bid for Intel, according to a third person familiar with the matter.
The sources requested anonymity because the discussions are confidential.
Intel declined to comment. Qualcomm did not immediately respond to a Reuters request for comment.
Shares of Intel closed 3.3% higher, while Qualcomm fell 2.9%.
Qualcomm’s approach comes at a time of weakness for Intel, once the world’s most valuable chipmaker but whose shares have lost nearly 60% of their value since the start of the year.
If a deal goes through, it will likely draw scrutiny from antitrust regulators in the United States, China and Europe. Qualcomm may have to divest parts of Intel to gain regulatory approval.
A bid would mark the biggest takeover attempt in the tech industry since Broadcom (NASDAQ:) tried to buy Qualcomm for $142 billion in 2018 before President Donald Trump reversed the deal, citing national security risks.
Reuters could not determine how Qualcomm, which has a market value of $188 billion, would finance a bid for Intel, which is valued at $122 billion, including its debt.
Qualcomm has about $13 billion in cash, according to recent company filings.
It’s also unclear how Qualcomm would approach acquiring Intel’s contract manufacturing business. To build chips with an atomic level of precision, Intel has invested hundreds of billions of dollars in the manufacturing process over the past decades and assembled tens of thousands of engineers to do it.
Qualcomm has never run a chip factory or factory and currently contracts with companies such as Taiwan Semiconductor Manufacturing Co and uses designs and other technology provided by Arm Holdings (NASDAQ:).
INTEL’S woes
Once the dominant force in chip manufacturing, Intel ceded its manufacturing advantage to Taiwanese rival TSMC and failed to produce a widely desired chip for the generative AI boom that benefited Nvidia (NASDAQ:) and AMD (NASDAQ:).
Intel has tried to change its business by focusing on AI processors and creating a chip contract manufacturing company, known as a foundry.
As part of a memo from CEO Pat Gelsinger, Intel released a series of announcements stemming from a board meeting last week. Gelsinger and other executives presented a plan to shave off businesses and restructure the company, Reuters previously reported.
The company plans to halt construction of factories in Poland and Germany and reduce its real estate holdings. Intel also said it had reached a deal to make a custom networking chip for Amazon.com’s (NASDAQ:) AWS.
The Wall Street Journal reported earlier on Friday about Qualcomm’s talks with Intel.
