The Six Five team discusses Intel’s Crazy News Week, Including A Qualcomm Acquisition?
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Transcript:
Daniel Newman: So, let’s talk about Intel. I mean, I don’t even know where to start. We could go in a hundred different directions. I really want to spend more time on the gossip because I feel like you and I covered so much ground in the beginning of the week, but how about I do the quick recap of some of the big news that started the week and then let’s maybe spend some time debating this Qualcomm takeover rumor? So they had three really big pieces of the news that started the week. Remember, last week was this big board meeting. It was the everything’s on the table. There’s been a lot of really bad media takes about what’s going on. There’s been some better takes.
You and I have been really trying hard to sort through all the noise and communicate to the market what’s going on, but this week, they had three pieces of news to start off. I think for Intel in a broader perspective, this was the best three pieces of news Intel could hold for in a week. One is they had some big news about a government contract funding up to $3 billion for manufacturing of secure enclave or specialty chips for DOD. This is a big win for Foundry. It’s a big win for the company to basically show that it has locked in the relationship. This is part of what’s going to make Foundry potentially go is that secure relationship that the government wants a US-based company to be helping manufacture advanced chips. We don’t know much about what they’re going to do, what they’re actually going to make, and we probably never will. That’s part of that relationship. But it was promising just given the number, the size and what’s going on, some of the delays of other Chips Act funding, this was a positive breakthrough for the company. Second thing, a nice announcement, everybody’s been saying they need another 18A win. They had the Microsoft announcements. They got AWS. AWS is going to make an AI mesh fabric network chip. This is what I call an entree into the relationship.
They haven’t necessarily won the Graviton Inferentia and Trainium contracts yet, which could be higher volume down the line, but this is going to be an important piece of silicon that’s going to be used for an important layer in the AI stack. It’s a proof point because AWS is pretty… Pat, I always say that they are pretty methodical in their decision making. If they didn’t feel that Intel could meet the mark, they would not make this commitment. So, this was a really nice validation for the company, given everything that has gone on, the rumors about Broadcom, some of the other historic rumors about the pre-1.0 PDK chip not meeting the mark. This was a good win. They also got a specialty Xeon 6 chip on Intel 3. So, it’s a different note, but another win. So, more AWS using Intel and Foundry. Then of course, the third piece, Pat, which I don’t know if this is much good news, but probably worth noting, it was an important piece of news for the company was they made a more decisive action in terms of how they’re going to split Foundry. They’re going to create a full subsidiary. They’re going to create full governance. They’re going to have its own board of directors. It’ll likely have a CEO that’ll be appointed to it or someone that will lead the business. It will have its own ERP.
It will have what we could call a full church and state between Intel the design and the parent business and Intel’s Foundry business. I think making this move was super important just for the partners and customers, especially the fabulous. The hyperscale is probably a little different in terms of how they would be open or not to sharing IP, but if they’re serious about wanting to ever get a Qualcomm, Nvidia, and AMD, this was a much needed decision that had to be made. So, those are the big news items. That’s my take on it. Then I’ll pass it to you by saying in Friday, you went on CNBC because a rumor broke that Intel was going to be taken over by Qualcomm. I’m going to hold my take on that. I’ll let you talk and maybe come back to that one.
Patrick Moorhead: Yeah, crazy week. It started off with the two of us talking to Pat Gelsinger and ended for me doing a CNBC hit on the potential takeover. But yeah, so I’m going to not just regurgitate what I said on CNBC, but it’ll be consistent here. These types of things happen when you have any company looking at strategic options, right? You’ve got multiple investment bankers and then competitors and complementors are looking for a way to exploit the situation either through acquisitions, creating turmoil, trying to get a better deal. People see blood in the water and then they just pounce on it. I think I used the term knives out in a post covering that initial week.
So, the way that I look at this is, hey, is this real or fake, real meaning there’s actual intent, or is it just to disrupt Intel a little bit more and make them look wobbly? It could be both, to be honest. Let’s say Qualcomm has an intent, but they know, hey, if they get it, then it’s goodness because they got it. If they don’t get it, it’s good news too because that has completely disrupted Intel. You better bet if Qualcomm is making a move, Broadcom, Nvidia, ARM, there’s a lot of people who might want to go in there to disrupt the disruptor. Hey, let’s make this deal 2X the price. Then you have to look at it from a synergistic point of view. Intel, big in data center, PCs, fab capacity, small and auto, no smartphones, larger industrial edge like servers. I’m hearing your clicks, bestie.
Then on Qualcomm, big in smartphones, big in connectivity IP, 5G, Wi-Fi, Bluetooth, huge in auto, no foundry, right? They’re giving those margin dollars to TSMC. Qualcomm, very small in the data center, its data center AI inferencing and even smaller than Intel on the industrial Edge. So, you’d have to be foolish to not say that there would be synergies. If you look at the areas where they have a one-for-one overlap, it’s in PCs. Intel has 80% market share. Qualcomm has probably less than 1% and they both do WiFi chips. Beyond that, it’s super synergistic. Things I thought about after my interview, I think, I had a whopping 30 minutes to think through this before I hopped on CMDC. Maybe it was 20 minutes.
It was Qualcomm and ARM do not exactly have this incredible relationship. What if another benefit could be Qualcomm getting the X-86 and licensing it to people for them to make their own chips? That was something that popped in my head. Also, I mentioned this on CNBC with Lip-Bu Tan, but so Lip-Bu Tan, icon. We talked about him, I think, on the last show. The more I hear about this, he was exited off the board. I think he wanted to run IFS. Potentially, I would give it a 50/50 shot that Lip-Bu is part of this and maybe he wanted something like this to happen in the first place. I also heard from two very well-sourced contacts that Lip-Bu wanted to run IFS. It’s interesting, you and I will both be at GSA and Lip-Bu will be there as well.
Maybe we’re going to bump into him at the drink line and we can ask him. Probably not. No, GSA, I’m not going to do that. But anyways, yeah, there’s going to be a lot of the same players. We’re going to be at GSA next week, Dan. So, could this happen? Yes. Is it likely? No. Piece parts versus full? I mean, Qualcomm’s doing great in auto. So, I don’t think it would want to buy that. I don’t know if they could get through even buying Mobileye, but Qualcomm’s doing great and I think they’re taking share away from Mobileye right now. So, I don’t see a piece parts. My final comment on regulatory would be at first glance, it seems completely freaking crazy. If Nvidia couldn’t get ARM across the line, how on earth would this happen?
But it’s interesting on the western front versus, let’s say, China, if this could be positioned as a savior for Western Foundry and Western… I mean if Qualcomm moved all of their capacity, let’s say 14A mobile flow, let’s just say it’s a good flow and it’s good, imagining what this could do to Western Foundry. That’s the way that this thing could be packaged to the regulators. Even though there wasn’t a whole lot of overlap between even what Nvidia did and ARM, I think there’s even less overlap between what Intel and Qualcomm does. But as we’ve talked about on this show, it all comes down to how you define the markets. All right.
Daniel Newman: Yeah, I only hit it quickly because we got to keep moving. You’ve got to work out or something this morning. But I just want to say, I put my tweet out. I’m just going to read this off because I’m having a little fun with it. I said, “My 10 visceral thoughts that immediately came out following it.” I said, “Qualcomm to buy or to take over? One…” I said, “All of it? No. Two, if they wanted to, still no. Three, regulatory would be incredibly complex, also read, no. Four, maybe parts of it were of interest, PC? Auto? Five, it would certainly be a path to entering data center at scale, but… Six, still no. Seven, Mobileye, nope, not that either. Eight, design business as a whole? Leaning towards no. Nine, Qualcomm entering the Fab/Foundry biz? My take, not a chance. Ten, I could be wrong, but even still, no, not happening.” Look, I do think this was intentional. I do think actually, like you said, there probably was some real interest in parts and pieces of the business. I think if you just look back to even the Qualcomm-Broadcom deal, this is just a takeover that just has no written all over it. There’s so many competitive implications to this.
You have a company that’s trying to roll out a new architecture to scale, to create competition inside the PC business. You’re going to let them take over the biggest market shareholder of the only competitive architecture and let them wind that down, wind that up. What are they going to do with it? I mean, I could see from a revenue standpoint, but how does that even work within its own conflictive nature of saying what is good and what is not? They’ve been spending the last two years saying X-86 is not performant, it’s not as power efficient. Were they going to do with that? Are they going to tear it down? Entering the data center would be the most interesting thing, but are they really going to enter with X-86? It just seems like their whole architecture of low power.
The last thing is Qualcomm has so many of its own regulatory challenges in terms of how it does licensing. This would just feel like it would open up a whole new can of worms to another set of long-term issues with regulators around the world. I don’t see how they get out of it. I do think it’s super fun and interesting to consider. I will be trying to continue to make sense of it. By the way, Pat, I said at the end, thanks for playing. I will gladly eat crow if I end up being wrong here. I will wear a Red Bull shirt on Saturday and a Tottenham jersey on Sunday if they end up having this happen.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
