What does Qualcomm’s interest in buying Intel’s chip design business mean for the future of PCs?

Qualcomm, Intel, AMD, and Apple have been in a fierce battle for domination of the chip market for AI PCs, which are touted as the future of computing.

Further ramping up competition in this fiery landscape, Qualcomm has reportedly explored buying portions of Intel’s design business, most notably client PC design, as Intel looks to spin off units ahead of an upcoming board meeting, anonymous sources told Reuters.

While it is said to have been considering an acquisition for months, Qualcomm has not formally approached Intel, the sources said.

“If Qualcomm makes this move, it could mark a significant shift in the balance of power in the PC chip market, potentially setting the stage for a more competitive landscape driven by AI-focused innovation,” said Scott Dylan, founder of NexaTech Ventures.

It would ultimately be a win for Qualcomm’s strategy to diversify beyond mobile chipsets, he added, “but it may also signal Intel’s retreat from its once-dominant position in the semiconductor market.”

Moving beyond a ‘saturated’ smartphone market

Qualcomm is most known for its smartphone chips, serving some of the biggest names in the market, such as Samsung, but it has continued to push hard into the chip market for AI PCs, and is taking direct aim at Intel as the company continues to struggle. Unlike Intel and AMD, with their x86-based architectures, Qualcomm offers ARM-powered chips, which are said to have better power efficiency and battery life — somewhere between 18 and 20 hours.

The company recently announced its PC processor, Snapdragon X Plus 8-core, which it said is designed for PCs as inexpensive as $700. It also entered into an exclusive partnership with Microsoft, with the computer giant’s Copilot+ PCs featuring Qualcomm’s X Series chips. Intel and AMD are not yet featured in these PCs.

“That gives Qualcomm a couple quarters of lead,” said Mario Morales, IDC’s group VP for enabling technologies and semiconductors. Still, he emphasized, “Qualcomm has an early lead, but it’s a long race.”

In an interview with CNBC, Qualcomm CEO Cristiano Amon said that the PC market is changing “fundamentally” due to the convergence of AI and desktop devices, and also because people expect the same performance from their computers as they get from their phones.

The company is probing the space because the smartphone market has become so saturated, Morales explained. Qualcomm is dominant in that market and is seeking out areas for growth and diversification. AI PCs are becoming increasingly important and “you cannot be a key semiconductor player and not get into the space,” said Morales.

Intel continues to struggle

Just last week, Intel announced its Core Ultra 200V line of processors, formerly Lunar Lake, to help keep Qualcomm and AMD at bay and maintain its share of PC chips and the laptop market. The processor line is designed to meet Microsoft’s requirements for powering a Copilot+ PC. Microsoft has said Core Ultra 200V, as well as AMD’s Ryzen AI 300, will likely be able to run apps on the PC as early as November.

“That way they can be AI PCs, not just AI-enabled,” Morales explained.

However, Intel’s stock is approaching record lows, and it has reduced staff by 15% and paused dividend payments. Its CEO, Pat Gelsinger, and other top execs are looking to trim operations, which could include the sale of its programmable chip unit, Altera. Morales explained that Intel has also recently gone through restructuring, splitting its design and products business from its manufacturing business.

“This is why you’re seeing the rumors going, because of that split,” said Morales.

Battery life has been a significant hurdle for Intel’s laptop chips, but in testing, the company said the Core Ultra 200V performs better than both Qualcomm’s and AMD’s chips. Intel calls the series the “latest evolution of AI PCs.”

ARM taking aim at x86

x86 (the architecture used by Intel and AMD) is the standard in the PC space today, comprising about 90% of the market (the remaining 10% is ARM-based), Morales explained. With this architecture, most components have separate chips (controllers), allowing them to be changed without impacting connectivity or the larger platform.

ARM (Qualcomm’s architecture), in contrast, does not have a separate CPU. The benefits of this architecture are lower power consumption and a longer battery life. This is “pretty compelling,” said Morales. However, x86 architecture has supported the PC market for decades.

“ARM Is still fairly new,” Morales explained. “What separates x86 from ARM is that legacy; x86 architecture will continue to play an important role in data centers and PCs.”

Yes, there have been gains for ARM, he noted, but those have so far been minimal. The architecture is “more pervasive” in other markets, including networking, storage, and embedded technologies.

It’s unclear what Qualcomm’s intentions would be around architecture: Should it acquire parts of Intel’s design business, would it seek to dominate both ARM and x86, or attempt to stifle the latter?

Morales, for his part, said: “Both architectures could have a position in the market. That’s been the case for the last few years.”

A fundamental pivot in the semiconductor space

Morales pointed out that Intel has a “very strong play in the enterprise. That enterprise play is what Qualcomm lacks today,” he said.

It’s highly unlikely that these rumors will come to fruition, he forecast — but if Qualcomm is eyeing Intel, it would more likely be interested in the company’s data center and networking segments than its design units.

In any case, it could signal a “broader strategic pivot” taking place in the semiconductor space, said Dylan.

“This move isn’t just about Qualcomm bolstering its existing portfolio; it’s a sign that the market is moving towards a more fragmented and specialized approach to chip design,” he said, pointing out that Intel’s struggles to generate cash and the 8% decline in its PC client business indicate that its PC division isn’t as central to its future as it once was.

“Qualcomm could potentially accelerate its move into the PC space, especially in AI-driven computing, which both companies are eyeing as the next frontier,” Dylan said.