Intel, a household name in chips, is reportedly a takeover target

Reports spread over the weekend that the chip giant Qualcomm is interested in acquiring another chipmaking giant, Intel. Both companies are keeping mum — for the moment — about what’s happening.

Intel was founded in 1968 and since then, it’s become a big name both in Silicon Valley and in the consumer world. You might have seen an Intel sticker on one of the computers housing its chips

The chip central to Intel’s success is called the central processing unit. Intel released its first version in 1971, said David Laws, the semiconductor curator at the Computer History Museum in Mountain View, California.

“It did take off as basically a simple controller in everything from traffic lights to cattle milking machines,” he said. “Eventually, it became the central processor in major computers.”

Think of the CPU as the computer’s brain. Intel’s clients include the makers of personal computers and companies that rely on big data centers, said Angelo Zino, a technology equity analyst at CFRA Research.

“For years, they have kind of been perceived as the most important component of a device,” he said.

But now, more companies want their devices to have artificial intelligence capabilities. And for that, Zino said, you need a different kind of chip called a graphics processing unit, or an accelerator. 

“Accelerators kind of help do exactly what the word is, and that is ‘accelerate’ the kind of computing power of a device,” he said.

This would be the computer’s brain on a mega-dose of coffee.

Intel does not specialize in making GPUs, Zino said. “They continue to lag on that side of things.”

In addition to missing the shift to AI, Zino said Intel has also lost market share on its bread and butter, CPUs. 

So now, Intel’s leaning hard into manufacturing and has a plan to make chips for other companies, not just its own designs, said Kunjan Sobhani, a Bloomberg Intelligence analyst.

“That would open up a massive new market for them,” he said.

Sobhani pointed out that Intel’s also received billions of dollars in CHIPS Act funding to help manufacture chips in the United States in factories called foundries.

“They can build, you know, a CPU for a customer. They can build a GPU,” he said. “So they don’t have to be limited to a certain type of chip.”

But these factories require a lot of liquidity to build, and Sobhani said while Intel is struggling with that, it’s become a potential takeover target.