Amid reports that Qualcomm (QCOM) has approached Intel (INTC) about a possible acquisition, Cory Johnson, chief market strategist at Futurum Group, sits down with Josh Lipton and Julie Hyman at Market Domination to take a closer look at what a potential acquisition would mean for the two chip companies.
“It would be the biggest deal in the history of the semiconductor industry,” says Johnson, explaining, “Intel was once the biggest semiconductor company in the world. It’s not anymore… They’re still very focused on selling chips in PCs because their business of selling chips in data centers just hasn’t worked. They’ve missed so many product cycles because Nvidia (NVDA) cleaned their clocks in data centers, and that shows no signs of changing anytime soon.”
Johnson notes that Intel’s recently announced deal with Amazon Web Services (AMZN) may provide hope that “they will be able to move some of their semiconductor manufacturing business into better directions as they build facilities around the world, and particularly in the United States.”
When asked how a merger would complement Qualcomm and Intel’s respective portfolios, Johnson said: “Intel has things that Qualcomm doesn’t really have.”
“It has manufacturing expertise; it has its place in data centers and in PCs. Qualcomm has some plans for PCs, but Qualcomm is primarily a smartphone company. The bulk of their business is making chips for smartphones… that’s something Intel has notoriously failed to do for decades,” he says. If Qualcomm were to acquire Intel, it could fundamentally change the company’s business, since “Qualcomm has not made its own chips in the past.”
A takeover would need to be approved by regulators, but the strategist believes that in this case, national security interests could be more important than antitrust concerns: “We really need a strong chip industry in this country to combat the risk of concentration in Taiwan. And something that would help Intel survive and improve, and this merger could be seen as welcome in Washington.”
Click here to watch the full episode of Market Domination Overtime for more expert insights and information on current market events.
This post was written by Naomi Buchanan.
