Founded in 1968, Intel was an American classic for developing computer parts, but has seen a decline in recent years. A potential acquisition of Qualcomm could raise some money, but chip industry analysts say it would also bring antitrust scrutiny and implementation difficulties in the current political environment. Although there is little overlap between Qualcomm’s mobile chip business and Intel’s focus on PCs and data centers, the Biden administration has been more skeptical of mergers in the past.

“There’s very little overlap. While you can argue there’s no consolidation, I still think this is something that will be looked at very closely rather than just nodding along to the finish line,” said Logan Purk, senior analyst at Edward Jones.

Intel’s foundry division could also be called into question, putting the billions in CHIPS and Science Act funding at risk. Intel is considered a prime example of American chip manufacturing and recently received a $3 billion increase in CHIPS Act funding.

“The government literally has a vested interest in this business succeeding,” Purk said. “It’s difficult when Qualcomm wants to spin this off and puts itself in that position politically.”

Qualcomm had previously considered buying parts of Intel’s design business, Reuters reported.

More independence for Intel’s foundries

Turning the foundry into an independent subsidiary “is the easiest way to unlock value at Intel at this point, given the significant losses and investments that this foundry business requires,” Purk said.

With greater independence, the foundry is no longer tied to the ups and downs of the CPU market, which has lost its luster over the past two years, says Dan Morgan, a senior portfolio manager at Synovus.

Intel’s foundries are expected to face tougher competition from companies such as GlobalFoundries, TSMC and Samsung. Intel shares rose 8% following Monday’s announcements.

Compared to companies like Nvidia that develop chips and pure-play chip foundries like TSMC that make chips for customers, Intel’s dual role has raised concerns among competitors and potential customers in the past.

“There is always a certain paranoia that as a top chip designer you send your designs to Intel so that they can build chips there, while Intel is competing with similar chips. I think that makes some people nervous,” says Purk.

Intel’s continued focus on CPUs rather than GPUs – which Nvidia focuses on and which are critical for AI computing – has also hurt the company’s relevance in the AI ​​boom, analysts say.

“They have so many things going on, and the amount of money it takes to do all these different things is just beyond expectations,” Morgan said.

When Intel’s rival Advanced Micro Devices faced a similarly dire financial situation in the 2000s, it split its design and manufacturing businesses into two companies and sold its foundries to an Abu Dhabi investment firm. The expensive chipmaking division became GlobalFoundries, one of the largest foundries in the world. Under the leadership of CEO Lisa Su, AMD eventually focused on cutting-edge technologies such as high-computing architecture GPUs and AI.

Intel faces a more difficult geopolitical environment as it makes its next moves. Selling to a foreign company is “politically indefensible” at this time due to national security concerns in the supply chain, said Stacy Rasgon, senior analyst at Bernstein Research.

Intel’s bet on Amazon

Gelsinger also announced Monday that the company will manufacture AI fabric chips for Amazon Web Services using its Intel 18A process node and a custom Xeon 6 chip on Intel 3.

The expanded collaboration between the two technology companies increases confidence that Intel can capitalize on the AI ​​boom, Rasgon said. Still, doubts about the announcement remain, as Amazon already makes its own custom chips.

“You have to remember that Amazon already produces two chips itself and still buys from Nvidia. Intel has brought something to the table in AI, but I don’t know how much that has really helped them,” Morgan said.

Intel is also facing an uphill battle, as the company has a history of falling behind on major development orders from its customers. After using Intel chips on its MacBooks for over 15 years, Apple introduced its own chip design, the M1, in 2020 and outsourced manufacturing to TSMC.

“Intel completely missed the mobile chip revolution and basically ruined Apple’s business because they thought the product wouldn’t sell in sufficient quantities. And we know how that turned out,” Purk said.