Intel Is Considered the ‘Best Suitor’ for Qualcomm’s Chipsets
Qualcomm Finally Succumbs to Jana Partners' Pressure to Split
Qualcomm’s possible split has put Intel in the limelight
The Wall Street Journal has stated that it considers Intel (INTC) to be the “best suitor” for Qualcomm’s (QCOM) chip unit if the company decides to split. Intel has its own fabs. This is expected to allow space for cost reduction for Qualcomm. It will be able to price its chips more competitively. Huge investments are required to operate fabs. As a result, many chipmaking companies have stopped operating their own capital-intensive fabs.
According to Cowen & Co. analyst Timothy Arcuri, if Intel acquires Qualcomm’s Snapdragon processors unit, Intel’s smartphone chip operations would get a new life. He stated, “The chip deal to end all chip deals.”
By buying Qualcomm’s chip operations, Intel’s dependence on the PC market will also reduce by a larger extent. According to Cody Acree, an analyst with Ascendiant Capital Markets, “This would catapult Intel into the leadership position and give it diversity away from PCs that it very much needs.”
Qualcomm leads the LTE modem space
In September 2014, Qualcomm announced that its Snapdragon line of ARM chips in over 1 billion Google (GOOG) Android phones has been shipped. As the above chart shows, Qualcomm dominates the LTE (long-term evolution) modems business market with an ~94% market share. Samsung (SSNLF) and NVIDIA (NVDA) have an ~3% and 1% market share, respectively. In contrast, Intel has only a 1% share in this market. Acquiring Qualcomm’s chip operations will give Intel strong entry in a high growth space.
Intel’s position will strengthen if it purchases Qualcomm’s chip business
Intel would also have a way to expand its presence in the Chinese market. In the last part of this series, we discussed that Qualcomm earns 50% of its revenue from China. Intel would also get a way to expand its presence in the Chinese market. Intel appears very interested in China. It bought a 20% stake in China (MCHI)-based Tsinghua Unigroup for $1.5 billion in 2014.
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