Qualcomm Bolsters 5G Ambitions With Planned $1.4 Billion Acquisition

By Asa Fitch 

Mobile-phone chip giant Qualcomm Inc. said Wednesday that it has agreed to acquire a chip startup founded by former Apple Inc. engineers, adding to a wave of deals remaking the semiconductor industry.

Qualcomm said it plans to buy Nuvia Inc. and use the two-year-old company's technology in its flagship smartphones, driver-assistance systems, laptops and networking infrastructure. The proposed all-cash transaction is valued at about $1.4 billion, Qualcomm said, before working capital and other adjustments.

Nuvia's expertise in designing central processing units, Qualcomm said, would help it boost chip performance and power efficiency--characteristics that are vital to success in the hot 5G-networking market that Qualcomm has made a priority.

The San Diego-based chip company is also bolstering its talent pool with the planned acquisition, adding Nuvia's staff and three founders, Gerard Williams III, Manu Gulati and John Bruno. Mr. Williams was lead chip architect at Apple before decamping to start Nuvia two years ago. Mr. Gulati and Mr. Bruno both worked at Apple and Alphabet Inc.'s Google unit before Nuvia.

"The Nuvia team are proven innovators," said Cristiano Amon, Qualcomm's president who this month was named to replace Steve Mollenkopf as chief executive at midyear.

A wave of deal making across the U.S. semiconductor landscape is transforming the industry amid strong demand for laptops, videogames and data centers. That demand has sent shares in some companies surging, helping companies gain financial muscle to do deals.

Nvidia Corp., whose shares more than doubled last year, has overtaken Intel Corp. as America's highest-valued chip company. The graphics-chip maker agreed last year to pay $40 billion for Arm Holdings, the British designer of mobile-phone chips backed by SoftBank Group Corp., in what would be the industry's biggest deal if it goes through.

Nuvia's CPUs--and Qualcomm's chips, which power hundreds of millions of mobile phones--are based on Arm technology.

Advanced Micro Devices Inc. has said it plans to buy rival chip maker Xilinx Inc. in an all-stock deal valued at $35 billion. Those proposed tie-ups landed after Analog Devices Inc. in July agreed to pay more than $20 billion for Maxim Integrated Products Inc.

Qualcomm's stock has risen about 70% over the past year, fueled in part by growing demand for superfast 5G phones.

The deal, which requires federal regulatory approval in the U.S., is a pivot for Nuvia, which began in 2019 as a stealth startup working on CPUs for computer servers that it expected would challenge market leaders Intel and Advanced Micro Devices. The company raised $240 million--a large amount for a chip startup--in its second funding round in September and was expecting to start testing its first silicon chips this year.

Qualcomm gave up development of server CPUs more than two years ago after failing to generate significant revenue from the business. The company has given no indication of reversing that decision.

The San Diego-based company is emerging from a tumultuous period and moved to put behind it years of legal trouble that included a long-running legal feud with Apple over Qualcomm's patent-licensing practices, an antitrust case brought by the Federal Trade Commission, repelling an activist investor, averting a hostile takeover and having a $44 billion acquisition scrapped amid U.S.-China political tensions.

Write to Asa Fitch at [e-mail]

(END) Dow Jones Newswires

January 13, 2021 08:14 ET (13:14 GMT)

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