Qualcomm eyes pieces of Intel’s struggling chip business

Qualcomm is reportedly exploring the possibility of acquiring parts of Intel’s chip design business to enhance its product portfolio. This potential move comes as Intel faces financial difficulties, prompting the company to consider divesting certain business units and assets, according to a Reuters report.

Qualcomm has been evaluating various parts of Intel’s design operations, with a particular interest in Intel’s client PC design business. However, other segments, such as Intel’s server division, are seen as less relevant to Qualcomm’s strategic goals, the report said citing sources.

While Qualcomm has not yet approached Intel regarding a deal, the discussions have been ongoing for months, and the plans could still change, insiders noted.

Queries to Qualcomm and Intel remained unanswered.

Acquiring Intel’s chip design business could offer Qualcomm a strategic opportunity to diversify its product offerings and expand beyond its mobile chip dominance. With AI becoming increasingly important, Intel’s expertise in PC chips could complement Qualcomm’s push into AI-driven computing.

“Qualcomm’s increasing interest in the PC chip business is no surprise,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. “This addition will strengthen the Qualcomm-Microsoft relationship and build on the Surface Laptop and Pro tablet series.”

He further added, “The convergence of mobile and personal computing devices offers Qualcomm a significant opportunity to create optimized experiences across device types.”

It will be great news for Qualcomm who can now enter the PC segment, especially in the AI world, said Titus M, practice director at Everest Group. “However, the exact forms and shape remain unknown and are now down to pure speculations.”

This move comes as Qualcomm aims to strengthen its Snapdragon X series, which as Gogia notes would “sit very well” with Intel’s design capabilities, enhancing Qualcomm’s position in the AI PC space. Gogia also highlights Qualcomm’s potential to disrupt the market with aggressive pricing, posing a significant challenge to competitors like AMD and Apple.

Intel’s financial struggles and ongoing restructuring

Intel, facing mounting financial challenges, posted disappointing results in its second quarter, leading to a 15% staff reduction and a suspension of dividend payments. The company’s PC client business, a cornerstone of its operations, saw an 8% drop in revenue last year as the overall PC market weakened. Executives are now banking on the introduction of AI features in PCs to spur consumer upgrades.

Titus weighed in on Intel’s position, noting that the PC segment remains vital for the company. “Even with the increased internal pressure, it does not make sense for Intel to lose its most dominant sector in the form of PCs,” Titus explained. He emphasized the importance of innovation in the semiconductor industry, especially as AI markets are poised for significant growth.

“I highly doubt Intel will be ready to sell its AI-focused designs right when the market is about to boom,” Titus added.

This week, Intel launched its Lunar Lake chip, designed to power AI applications, as part of its push to regain a competitive edge. However, Intel outsourced significant portions of the chip’s fabrication to TSMC, a shift from its historical reliance on in-house production.

Qualcomm’s expansion strategy

With the potential acquisition, Qualcomm could significantly expand its footprint in the PC chip market, which is becoming increasingly intertwined with AI-driven computing. Gogia adds that such a deal would “allow Qualcomm to carve out a niche for supporting devices that allow AI tasks to be run without an internet connection.” This could further strengthen Qualcomm’s relationship with Microsoft, especially as both companies continue to explore opportunities in AI PCs.

Qualcomm may also be interested in Intel’s server and HPC segments, opined Neil Shah, VP for Research at Counterpoint Research. “This is a key market where Qualcomm is not yet playing, but where Intel is struggling against NVIDIA and AMD,” he said adding that Intel’s Altera (FPGA) and Movidius (Visual Processing Units) would help fill gaps in Qualcomm’s portfolio.

However, the speculation surrounding this potential acquisition highlights that Intel may still be considering other strategies to cut costs while maintaining its market presence.

“Intel will have to decide which business is long-term lucrative and which is not, especially in a highly competitive environment with both AMD and Arm-based servers gaining ground,” Shah said.

Broader implications

The acquisition, if realized, could also alter competitive dynamics in the semiconductor market. Faisal Kawoosa, Founder and Lead Analyst at Techarc, noted that Qualcomm is well-positioned to capitalize on growth opportunities in the PC sector.

“With Intel’s design capabilities under the belt, Qualcomm can be aggressive about this market and become a strategic partner to Microsoft,” Kawoosa said. He also pointed out that Intel’s core competencies in high-performance processors may be better suited for the server market, where the company could refocus its efforts against the rising dominance of Nvidia in AI and server segments.

Kawoosa added that the acquisition would serve Qualcomm well in a market where “laptops still have huge potential to grow even in markets like India, where penetration is very low.” He said this move could help Qualcomm become a stronger player in the PC and AI sectors.