In a striking turn of events, Intel, once the undisputed leader in global chip manufacturing, now grapples with various challenges that have positioned the company as a potential acquisition target. The 68-year-old company, founded by semiconductor pioneers Gordon Moore (of Moore’s law) and Robert Noyce, could cease to exist as it is today.
Source: Intel
Qualcomm’s interest in buying Intel, reported on Friday by the Wall Street Journal, reflects a monumental shift in the semiconductor industry. Big companies are facing challenges from new technologies, mistakes in their plans, and changes in market demand. Intel is having problems, while Qualcomm is doing well because it innovates in mobile and laptop processors. This shows significant changes in the chip industry that could reshape its future — and the supply chain that supports it. Intel and Qualcomm are leading suppliers to component and computer distributors around the globe.
CHIPS Act’s limited impact
The 2022 U.S. CHIPS and Science Act aimed to boost domestic semiconductor manufacturing with financial incentives. Intel, a former industry leader, has struggled to meet production schedules despite significant government support, leading to concerns about its global competitiveness and resulting in significant cost-cutting measures.
In August, Intel announced plans to lay off 15,000 workers and cut $10 billion in costs by next year. While these moves are necessary to preserve cash flow, they have done little to restore investor confidence. Intel’s stock has plummeted by nearly 70 percent from its peak in early 2020, leaving the company vulnerable to takeover bids and activist investors.
Intel’s Pat Gelsinger. Source: Intel
On September 16, Intel CEO Pat Gelsinger announced a two-year delay in the company’s new facilities in Germany and Poland, citing “anticipated market demand” as the reason for the pause. This announcement significantly blew Europe’s hopes for local chip production, but Intel maintained its commitment to U.S. projects in Ohio, Oregon, Arizona, and New Mexico. Still, concerns remain. As industry experts point out, Intel’s facility in Ohio, projected to be a $100 billion hub for chip production, has yet to install any significant manufacturing equipment.
Delays like these could hurt Intel’s commitment under the CHIPS Act. Despite Commerce Secretary Gina Raimondo’s efforts to persuade companies like Nvidia and Apple to use Intel’s facilities, this might show increasing concern within the CHIPS Program Office. Raimondo’s recent talks with potential Intel customers highlight a lack of confidence in the company’s ability to produce advanced, high-volume chips. This issue is made worse by Intel’s continued dependence on foreign foundries like TSMC.
Intel’s PC chip market dominance is already challenged by rivals like AMD and Apple, whose M-series chips, based on Arm architecture, have raised the bar on performance and efficiency. Qualcomm’s Snapdragon X Elite adds another competitor to this mix, further undermining Intel’s position.
Source: Qualcomm
Qualcomm’s new Snapdragon X Elite processor, which powers laptops from major manufacturers such as Acer, Dell, HP, and Lenovo, is already positioned as a formidable rival to Intel’s Core chips. Based on Arm cores, it is not just another chip—it is Qualcomm’s direct challenge to Intel in the highly competitive laptop market. With promises of higher performance and longer battery life, Qualcomm’s processor threatens to erode one of Intel’s most important market segments.
Qualcomm’s approach and strategic implications
Qualcomm wants to diversify beyond mobile chips. Acquiring parts of Intel would let Qualcomm enter new markets like personal computers and data centers. Unlike Intel, Qualcomm outsources its manufacturing to avoid high costs.
Patrick Little, a former Qualcomm executive and current CEO of SiFive, a startup specializing in rival microprocessor designs, told the New York Times that Qualcomm’s interest is mainly in Intel’s chip design and software capabilities. “Those are things Qualcomm would have to mature on their own over time,” Little explained, adding that acquiring Intel could accelerate Qualcomm’s entry into markets where it has less expertise.
Qualcomm’s potential acquisition of Intel would likely encounter thorough regulatory review, especially due to Intel’s U.S.-based foundry operations that produce chips for defense applications. As of this month, 2024, Intel reportedly qualified for as much as $3.5 billion in federal grants to make semiconductors for the Defense Department. It’s unclear whether Qualcomm would want to keep Intel’s manufacturing business, which has been a financial burden. Qualcomm has experience navigating such challenges, as seen in its unsuccessful two-year attempt to acquire Dutch semiconductor company NXP in 2016, largely due to delays in China’s approval process.
Source: Qualcomm
If Qualcomm successfully acquires Intel, it could have a profound impact on the global semiconductor landscape. Qualcomm’s expertise in mobile chips combined with Intel’s strengths in personal computing and data center technologies could create a powerhouse capable of competing more directly with Nvidia, AMD, and even TSMC.
However, it remains to be seen whether Qualcomm would be willing or able to take over Intel’s foundry operations, which have been a critical focus of U.S. national security efforts under the CHIPS Act.
Global supply chains are complex, and the cyclical nature of the semiconductor industry makes it difficult to predict when demand for specific chips will rise or fall. In the coming months, all eyes will be on how Intel navigates its ongoing transformation and whether Qualcomm’s interest leads to a formal takeover bid.
An Intel acquisition by Qualcomm has significant implications for the supply chain. When two chip companies merge, distributors are often added or dropped depending on each company’s franchise agreements. Product lines are often discontinued, presenting challenges for customers with long-lifecycle products.
Customers also stand to gain or lose leverage. OEMs that buy from both companies could consolidate their purchases making them more important to the merged entity. But smaller customers that now buy directly from either supplier could be transferred to the distribution channel.
Supplier franchises are not necessarily global, meaning distribution customers could source products in Asia that are not available in the Americas and vice versa; and some franchises may be limited to one country or region. Currently both chipmakers list Arrow Electronics Inc. and Avnet Inc. as component distributors. Both also distribute through Asia-based distributors World Peace Group (WPG) and WT Microelectronics — which owns Future Electronics — and a variety of local, regional, specialized and catalog distributors.
Future Electronics does not list Intel as a franchised line.
Qualcomm already challenging Intel’s CPU dominance
For Intel, the stakes are higher than ever, as the company faces the possibility of being absorbed by a rival it once overshadowed. For Qualcomm, there is the opportunity to expand into new markets, and position itself as a dominant player in computing, expanding its reach beyond mobile. Either way, the semiconductor industry is on the brink of a major shake-up that could redefine its future
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