Intel rejects Arm approach for chip division

Arm Holdings has approached Intel with a proposal to acquire a slice of its struggling chip design and manufacturing division.
The Nasdaq-listed British company is interested in Intel’s chip division but not the manufacturing unit, according to a report by Bloomberg, which added that Arm had been told that the business was not for sale. Arm and Intel declined to comment.
Last month Intel revealed plans to cut 15,000 jobs as it looked to revive its manufacturing operations. It is attempting to turn around its business by focusing on AI processors and creating a chip contract manufacturing business. It was once dominant in chipmaking, but has lost its manufacturing edge to TSMC, of Taiwan. It also has fallen behind Nvidia and AMD in the development of artificial intelligence.
Intel’s shares have halved in value in the year to date. They fell sharply after the cost-cutting plan was announced and after the company warned that its revenue for this quarter would be lower than expected. It also said that it would suspend its dividend. In August its market capitalisation fell below $100 billion for the first time since 2012.
The company’s troubles have left it vulnerable to a takeover. Qualcomm, a rival chip specialist, approached Intel this month over a potential acquisition.
Intel is separating its chip product division from its manufacturing operations, which Bloomberg has reported is aimed at attracting outside customers and investors and lays the groundwork for the company to be split up.
Arm is majority-owned by SoftBank, of Japan, but is based in Cambridge. It was founded in 1990 as a joint venture between Acorn and Apple and was bought by SoftBank for £24 billion in 2016. It was floated on the Nasdaq stock exchange in New York last September.
It licenses technology and designs to customers, with clients such as Amazon, Qualcomm and Samsung. It is regarded as a beneficiary of the AI spending boom, especially as it moves further into data centre chips.
In July Rene Haas, 62, Arm’s chief executive, said: “As the energy needs of AI continue to escalate, so does the demand for the high-performance, power-efficient Arm compute platform.”
Intel, which is valued at $102 billion, was an investor in Arm before selling its stake of 1.2 million shares in the second quarter of the year, a regulatory filing has revealed. The move was said to have raised roughly $147 million, based on Arm’s average share price between April and June. Arm is valued at $156 billion at present.
Intel is the only American company that both designs and manufactures advanced chips. Some investors have called on the business to focus on one or the other, but Peter Gelsinger, its chief executive, has pursued both. As such, the company has benefited from the Biden administration’s Chips and Science Act, which was passed two years ago to provide tax benefits, loan guarantees and grants to encourage American businesses to build chip manufacturing plans in the United States.
Intel said this month that it had secured up to $3 billion from the US government to help to manufacture advanced chips for the military. It also revealed that it had agreed a multibillion-dollar contract to make AI chips for Amazon, using its new and most advanced 18A manufacturing process.
This year Microsoft also agreed a tie-up with Intel to use its foundry to create its own custom computer chip.
Shares in Arm Holdings were down by $2.45, or 1.6 per cent, at $146.71 in early trading on Wall Street; Intel’s stock was up by 11 cents, or 0.5 per cent, at $24.03.