Qualcomm (QCOM.US) to acquire Intel (INTC.US)? The latter once rose more than 9%

Reports have emerged that Qualcomm (QCOM.US) recently approached Intel (INTC.US) to discuss a potential acquisition, which sent Intel's stock soaring nearly 9% in after-hours trading on Friday. The stock closed up 3.31% at $21.84.

The report, citing people familiar with the matter, said the deal was not finalized and still faced many uncertainties. Intel declined to comment, and Qualcomm has yet to respond to the news.

While Qualcomm and Intel are competitors in the personal computer, laptop, and other markets, the two companies have significant differences in their operating models. Qualcomm does not have its own manufacturing capabilities, relying on contract manufacturers such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung for chip production. In contrast, Intel has its own manufacturing facilities.

Although Qualcomm's market size is smaller than Intel, with revenue of $35.8 billion in its 2023 fiscal year compared to Intel's $54.2 billion in the same period, Qualcomm's leadership in chip design and innovation still makes it a formidable competitor.

However, antitrust regulation and national security concerns pose significant challenges to such potential deals. Both companies have significant businesses in China, where the country's antitrust regulator previously blocked Intel's acquisition of Tower Semiconductor and Qualcomm's acquisition of NXP Semiconductors.

Other large mergers and acquisitions have also faced regulatory hurdles in recent years. For example, Broadcom's proposed $130 billion acquisition of Qualcomm in 2017 was halted by the Trump administration due to national security concerns. In 2021, Nvidia's attempt to acquire Arm was blocked by the U.S. Federal Trade Commission due to antitrust concerns, and the deal was formally terminated in 2022 under pressure from regulators in Europe and Asia.

Intel has struggled this year. Just last month, the company released a series of negative news, leading to a significant drop in its stock price. This included laying off 15,000 employees, suspending dividend payments, reporting a poor second-quarter earnings report, and providing a weaker future performance outlook.

After the earnings release, Intel CEO Pat Gelsinger said that while the decisions were "painful and difficult," they were necessary for the company's future. He said that Intel had achieved key milestones in its transformation, but to achieve its future "grand plan," it must refocus on improving efficiency. Intel's stock has fallen about 55% this year.