Broadcom reportedly investigates acquiring Intel’s chip design biz

Shhh. Don’t tell Hock Tan about those Xeons that unlock functions when you pay a fee

Broadcom is reportedly contemplating a play for Intel.

The Wall Street Journal reports that Broadcom has closely examined Intel’s chip design and marketing businesses with a view to a possible acquisition, conditional upon someone else taking on Intel’s foundry business.

Broadcom already has a very substantial chip design business but outsources manufacturing. It’s hard to imagine the company would change that strategy.

The Hock Tan-led company also has a history of acquiring outfits whose products are so deeply embedded in enterprise IT stacks that users are unlikely to replace them.

Intel, like past Broadcom acquisitions VMware and CA Technologies, meets that description as its Xeon processors dominate many datacenters. Plenty of enterprises have built their tech stacks on the x86 architecture and the Xeon ecosystem. Few will be able to adopt a replacement in a hurry.

Intel also offers Broadcom another thing it covets: Subscription revenue.

Readers may recall that in 2022 Chipzilla introduced “software-defined silicon” in the form of a scheme called “Intel on Demand” that made it possible to activate features of Xeon processors such as software guard extensions or RAID capabilities upon payment of one-off additional fees. Intel On Demand also allows consumption-based pricing, an idea HPE has adopted in its GreenLake IT-as-a-service offering.

The Register fancies Broadcom would make Intel on Demand a more prominent feature of its processors under its business model that Netflix, in an unflattering assessment of the company filed in a lawsuit, described as “Buy. Chop up. Sell off. Raise prices. Rinse. Repeat.”

The “raise prices” part of that model would not be sensible for Intel’s desktop chips, which are already struggling to compete on features and price with product from AMD and Qualcomm. But the “Chop up. Sell off.” tactics could come into play if Broadcom decides it would rather not contest the drooping PC market.

Intel’s current market capitalization is just over $100 billion, and Broadcom would pay less for its chip design arm alone – perhaps a smaller sum than the $61 billion it paid for VMware.

That deal saw Broadcom cut costs, improve margins and boost profits to a greater extent than it initially thought possible, perhaps giving the company confidence its acquisition methodologies are sufficiently efficient it could swallow Intel. Increasing acquisition costs for VMware software and associated services was a big contributor to that achievement.

Other speculation about the semiconductor giant’s fate includes the possibility its fabrication business could be sold to a consortium that includes Taiwan’s TSMC. Any sale of Intel’s chip factories would need regulatory approval in many jurisdictions. A deal could prove especially contentious in Washington, where the Trump administration has signalled its displeasure with the CHIPS Act that funnelled billions to Intel and other chipmakers to fund their build of semiconductor fabs in the USA.

Nvidia disarms, a bit

In other semiconductor ownership news, a Valentines Day filing from Nvidia reveals the AI hardware giant sold 44 percent of its shares in chip designer Arm.

Nvidia packs its Grace superchips full of Arm CPUs and is rumoured to be creating an Arm-based PC processor, so selling some shares is not necessarily an indication of displeasure with the UK-based chip design firm. It’s more likely just Nvidia rebalancing its asset portfolio, evidence of which can be seen in the fact the same filing records it sold all its shares in three other companies, and picked up its first stakes in datacenter operator Applied Digital and an outfit called Recursion Pharmaceuticals. ®