An analyst believes Intel could acquire Taiwanese chipmaker MediaTek for $27 billion in an effort to grow its wireless business.
RBC Capital Markets analyst Doug Freedman told The Street that such a deal will materialise over the next two to three years out of necessity. Freedman argues Intel could reduce investment losses in the wireless segment with such a move.
Intel is currently spending upwards of $1 billion a quarter on its ambitious mobile expansion plans and so far it does not have much to show for it.
MediaTek on the other hand is doing quite well and it has cemented its position as the world’s leading provider of value SoC designs. Freedman says buying MediaTek could be a “less expensive way” to increase market share and it would entail less risk.
"Instead of Intel continuing to spend $4-$6 billion a year to enter the market (higher end of spending range as it achieves success), hypothetically, an acquisition of MediaTek may reallocate Intel's best-in-class under-utilized fabs and financial resources to a rising star in the system-on-chip world, solidifying MediaTek's market position," the analyst wrote in a note.
MediaTek is anything but cheap
Although MediaTek is usually associated with cheap chips, the company is the world’s second biggest supplier of ARM-based processors.
Freedman estimates the value of a potential Intel bid to take over the company at $27 billion. That is a 30 percent premium to MediaTek’s current value. However, he argues that the deal would still be beneficial to Intel, as it would save money in the long run. Therefore he believes some sort of deal is inevitable.
Until recently Intel did not cross paths with the likes of MediaTek, Rockchip, Allwinner or any of a number of ARM chip designers. That changed earlier this year when the US chipmaker started aggressively pursuing tablet design wins.
Intel surprised many observers when it reached a deal with Rockchip last May. Under the deal Rockchip will start selling Intel SoFIA chips in mid-2015. Rockchip is focused on tablets, while MediaTek tends to go after phones.