2024 is a bad year for Intel, as its stock price has fallen by over 56% since the beginning of the year. Now, one of the iconic companies rising in Silicon Valley has finally become an acquisition target being considered by its rivals who are eyeing it closely.
On September 20th local time, according to The Wall Street Journal, Qualcomm has recently proposed an acquisition plan to Intel Corporation. According to reports, this potential transaction is still far from certain, and even if Intel accepts Qualcomm's offer, such a large-scale transaction would be subject to antitrust scrutiny. And in order to complete this transaction, Qualcomm may plan to sell some of Intel's assets to other buyers.
Intel and Qualcomm are both giants in the chip industry, but their main markets and business models differ. Intel designs and produces chips, while Qualcomm only designs chips based on ARM architecture and does not engage in chip manufacturing business. Instead, it transfers its orders to chip foundries such as TSMC, focusing on upstream chip profits. In addition, Intel's main markets are personal computers and data centers, while Qualcomm focuses on mobile devices such as smartphones.
The fundamental reason for Intel's decline in the past two years is still that it has not been able to keep up with the booming AI wave. Since OpenAI released ChatGPT in November 2022, the entire computing industry has reevaluated the value of GPUs and CPUs in computing devices, and the importance of GPUs has rapidly increased. Correspondingly, Nvidia's stock price and market value have multiplied several times in the past two years, and now it has become one of the world's top three companies with the highest market value, along with Apple and Microsoft.
Meanwhile, CPU giant Intel has been neglected by the market and capital. Although Intel has been making great efforts in recent years to shift towards AI, marketing trendy concepts such as "AI PC", and attempting to revive itself through its chip foundry business, the results have been unsatisfactory. The "AI PC" has not been fully accepted by the market, and Intel's chip foundry cannot compete with TSMC and other companies. Without an increase in revenue, Intel's diversified business strategy has made it unable to compete with chip foundries and missed the AI chip wave. The high cost growth has put pressure on its profit margin, and it even turned a profit into a loss in the second quarter. To this end, Intel immediately announced the largest cost cutting and layoffs plan in the company's history, planning to lay off 15000 employees, accounting for 15% of the total, with most of the work to be completed by the end of this year.
Analysts and investors have indicated that Intel may be removed from the Dow Jones Industrial Average.
The potential transaction itself is still in the very early stages of exploration, but even so, Wall Street immediately gave different feedback to the two companies. On Friday, Intel's stock price closed up 3.3%, and its investors were clearly excited about it, while Qualcomm fell 2.9%, and its investors were not optimistic about potential trades. Unlike Intel's halved stock price this year, Qualcomm has risen 16% since the beginning of the year and its current market value is $188 billion, about twice that of Intel.
If Qualcomm's acquisition of Intel can ultimately succeed after lengthy negotiations, it will become the largest transaction in the history of the semiconductor market and may change the overall landscape of the industry.