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MarketWatch First Take: Intel desires to purchase AMD's previous chip enterprise? How unusual will semiconductor fusions get?

In the midst of an unprecedented global chip scarcity, the crazy world of semiconductor fusions could be completely through the mirror.

The Wall Street Journal reported Thursday that chip giant Intel Corp.
INTC,
-1.26%
is considering a $ 30 billion deal to purchase GlobalFoundries Inc., a semiconductor contract manufacturer owned by the Abu Dhabi government investment arm. The previous owner of GlobalFoundries: Intel's biggest rival Advanced Micro Devices Inc.
AMD,
-2.38%,
which spun off the manufacturing arm in a 2009 deal and committed to buying $ 1.6 billion worth of chips from the manufacturer last May.

An Intel spokeswoman declined to comment, as did an AMD spokesperson.

The two companies have had a decade-long rivalry in Silicon Valley, where AMD, as a licensed second source for Intel-compatible chips, has mostly lived in Intel's shadow and rarely (if ever) posed a serious competitive threat. Until now. Led by CEO Lisa Su and her team, AMD has gained market share in both the PC and server markets, starting with its Zen architecture.

After years of poor manufacturing results, Intel's new chief executive Pat Gelsinger has pushed for his company's foundry business to grow massively and produce more chips for other semiconductor companies. GlobalFoundries would be a jump start, but regulatory issues would abound.

Control is a normal course for the semiconductor world, where mergers have gotten weird and somewhat desperate in recent years (and have drawn government attention). Nvidia Corp.
NVDA,
-4.41%
got the ball rolling by agreeing to buy ARM Holdings from Softbank Group
9984,
-0.84%,
willing to license designs to some of its biggest competitors. Despite some regulatory scrutiny and some competitors, Nvidia executives are still confident that the deal will close.

Three semiconductor companies recently backed Nvidia's proposal to buy ARM: Broadcom Inc.
AVGO,
-0.88%,
Marvell Technology Inc.
MRVL,
-0.55%
and MediaTek
2454,
-0.11%
from Taiwan, despite their usually very competitive stance. Broadcom CEO Hok Tan, who is known for not saying words, said Nvidia had assured the company that it "will continue to make this technology available to the industry on a fair, reasonable and non-discriminatory basis."

Some of these executives – Tan in particular – are familiar with the regulatory pressures Nvidia faces. Broadcom tried to get Qualcomm Corp.
QCOM,
-1.59%
and saw the Trump administration stand in the way, citing China. Chinese investors looking to buy chip companies have been blocked by the US for years, even though Broadcom was based in Singapore at the time and relocated its headquarters back to the US and then made its own head-racking acquisition in 2018 by purchasing the mainframe software maker CA Technologies.

Qualcomm has reportedly urged regulators to block Nvidia's deal on ARM. Qualcomm has had its own problems with the same government agencies, including years of antitrust litigation with the Federal Trade Commission. Now the FTC has its eyes on Broadcom and earlier this month charged the company with illegally monopolizing the market for chips used in cable set-top boxes and broadband devices.

Strange bedfellows, questionable businesses, and regulatory reviews come with the territory in semiconductors. However, Intel plans to spend $ 30 billion on former chip manufacturing of its biggest rival so it can make more chips for its competitors (including AMD) but would take that to a new level.

As the semiconductor industry continues to grapple with the problem of demand and the ability to make enough chips, strange and unusual sagas are likely to continue as the largest companies examine all of their options to stay on top or stay competitive, even if that means trying to buy a company that is a big cultural outsider (yoga classes! M & Ms) or making chips for your biggest competitor. It's all just another journey through the mirror of the crazy semiconductor industry.

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