Qualcomm buying Intel doesn’t make sense, Wall Street’s top chip analyst says

Intel CEO Pat Gelsinger.

Intel and Qualcomm have not commented on Friday’s reports that the mobile-phone giant is interested in purchasing one of the original Silicon Valley tech companies. But one of Wall Street’s most heeded chip luminaries has waded in, and he’s largely not in favor.

“We’ll be honest. We would prefer that Qualcomm not pursue this as it seems very risky to us given uncertain returns,” Bernstein’s team of chip analysts, headed by Stacy Rasgon, wrote.

Though buying Intel would help Qualcomm diversify its product offering (80% of its revenue comes from the smartphone market) by entering the PC and data-center markets, Qualcomm lacks the experience to make up for Intel’s greatness weakness.

Intel’s fabs, the industry term for semiconductor factories, are the biggest problem in its portfolio. As Intel’s management of them has faltered, competitors like TSMC have risen and dominated cutting-edge chips.

Rasgon and his team wrote that Intel was having “enough trouble” managing its fabrication plants on its own.

“We don’t think anyone else would really want to run them, and believe scrapping them is unlikely to be politically viable at this point,” Rasgon wrote. Intel’s fabs are politically valuable because some are in the US — Arizona, Oregon, and New Mexico, to be exact. Maintaining US semiconductor production is a matter of economic and national security.

This has led to some speculation that Qualcomm would immediately sell the fabs in the event of an acquisition. Rasgon wrote earlier this month that Intel’s manufacturing business “cannot stand on its own right now given heavy losses and lack of scale.”

Still, the analyst also questioned whether Intel was in such bad shape that this “fire sale” off-ramp was necessary.

“Is Intel desperate enough to seriously consider something like this? We’re not so sure,” Rasgon and the team said.