Broadcom Eyes Intel's Chip Design Amidst Market Slump and Strategic Overhaul

As of last week, Broadcom (AVGO) has declined by 3.56%, marking two consecutive days of losses, with a total drop of 4.40% over the recent two days. The company's market performance over the past week saw a decrease of 7.27%, contributing to a year-to-date decline of 5.68%, with its latest market valuation standing at $1,024.9 billion.

In recent developments, Broadcom and TSMC are reportedly considering a plan to split Intel, a leading American chip manufacturer, into two divisions. Broadcom is particularly interested in Intel's chip design and marketing arm, although any acquisition would depend on finding a partner to manage Intel's manufacturing unit. TSMC is also exploring the possibility of gaining control of some of Intel’s factories, although discussions remain informal at this stage.

Intel, currently navigating through challenges in advanced process technology, has drawn attention due to its strategic significance to national security. These factors make discussions with potential buyers and government officials of critical importance.

Furthermore, Broadcom stands to benefit from Arm's push into custom chip design. As companies like Google, Microsoft, Meta, and Amazon pursue AI-centric integrated circuits for efficiency, Broadcom’s extensive ASIC operations are poised to play a key role. Analysts suggest that Broadcom may also be in talks with OpenAI for developing proprietary processors, alongside collaboration with Arm.

In contrast, Piper Sandler analysts highlight the potential profitability if Broadcom acquires Intel’s x86 business, despite Broadcom showing little interest in Intel’s manufacturing segment. Broadcom's management style may lean towards streamlining Intel’s client operations and potentially shutting down less profitable ventures like AI chip development.

Since its acquisition of VMware, Broadcom has faced criticism and rising discontent among customers over its pricing strategy. The steep increase in VMware's licensing fees post-acquisition has led clients to consider alternative solutions aggressively.

Broadcom's acquisition strategy has been characterized by acquiring companies facing industry challenges but sustaining substantial growth post-acquisition, transforming into a formidable tech conglomerate.