The Impact of Qualcomm Buying Intel

It was reported that Qualcomm approached Intel to explore buying the company. While such a purchase is unlikely to be approved, given the influence of both companies and Intel’s desire to remain independent, it isn’t impossible, and the two companies are broadly cross-pollinated by employees who have worked at both.

But such a merger would have a broad impact on the current smartphone, PC, workstation and server markets. Let’s explore what that might look like.

Qualcomm + Intel

Despite employee commonality across both companies, they are very different in operation and focus. Qualcomm is focused on smartphones, automotive, IoT, and, most recently, AI PCs. Intel is mostly focused on servers, workstations, HPCs, and PCs, with some reduced interest in automotive. In addition, Qualcomm is fabless (it doesn’t manufacture its own parts), while Intel is aggressively growing its own manufacturing and adding foundry capabilities.

Except for PCs and some automotive, the two companies don’t compete as much with each other as they tend to do with other competitors, so the merged company would have Qualcomm’s ARM-based technology focused on things that use batteries or have other power limitations and Intel would focus on pure power.

Qualcomm would spin out manufacturing both because it isn’t that interested in it and because it would have to downsize Intel in order to get the merger regulatory approval. The resulting company would span smartphones to PCs uniquely and while they might still license from ARM, they’d own the x86 IP.

ARM

ARM would be at risk because when a company owns a technology, it tends to favor it over a technology it licenses. Intel almost got x86 to work in mobile devices but struggled to overcome Qualcomm’s massive modem advantage. But if the companies merged, there would be a significant interest in spreading x86 (the owned technology) to mobile, which would be stronger than taking the licensed ARM technology to workstations, desktop PCs, servers, and high-performance computers (HPC).

I wouldn’t expect this to happen immediately, but over a five-year period after the merger, and there is the possibility of evolving x86 using the knowledge that Qualcomm has garnered from its mobile work into something that is still performant but uses far less energy. Qualcomm has a tighter inside track with Microsoft on AI right now, and the combined company would have a relationship with Microsoft that would rival the Microsoft/Intel relationship in the 1990s. I expect Microsoft would support this merger as a result.

So, this merger would significantly reduce Qualcomm’s interest in continuing to license from ARM over time.

AMD

AMD licenses x86 from Intel, and those licenses should continue. As part of the expected concessions, I would expect this relationship’s existence to be assured in order to assure competition. However, the combined resources of Qualcomm and Intel will, once settled, result in a far more powerful competitor with far more product reach than AMD can offer alone. I’d expect AMD will seek to merge with another firm, possibly an ARM licensee like Media Technologies, in order to better balance the playing field. Thus, we’d see a large market consolidation, which could include ARM eventually being purchased by a then larger AMD as a counter to the Qualcomm/Intel x86 focus.

If AMD and ARM see this potential merger of Qualcomm and Intel as a big enough threat, it could move first which would force Qualcomm and Intel to merge in response.

Wrapping Up

While unlikely, the idea of a Qualcomm and Intel merger has merit and could massively change the processor power balance. Qualcomm also has an advanced GPU technology that was purchased from AMD that could significantly enhance Intel’s efforts. The resulting ripple effect could force other mergers between AMD, ARM, and companies like Media Technologies, either in response to or in anticipation of this merger.

So, while I believe the likelihood of this merger is unlikely initially, the fact this is being considered may result in a sequence of events that will eventually force this outcome. This news has a lot of CEOs suddenly thinking more creatively about their collective companies’ futures.