TECH

Intel may team up with TSMC to strengthen US chip production

A potential Intel-TSMC partnership could end up reshaping global supply chains in the semiconductor sector. However, the actual effects will depend on the specific terms of any agreement and how successfully the collaboration is implemented.

A potential partnership between Intel and TSMC is being discussed that, if realized, could reshape the global chip manufacturing landscape and address ongoing concerns about the concentration of advanced chip production in Asia.

According to an analyst note from Baird, discussions are underway regarding a possible arrangement in which TSMC would send engineers to one of Intel's advanced chip factories. The purpose of this collaboration would be to apply TSMC's expertise and ensure the viability of Intel's manufacturing processes.

The proposed partnership could take an even more substantial form, with the possibility of spinning off the factory into a new entity jointly owned by Intel and TSMC. This new venture would be operated by TSMC and could potentially receive funding from the US CHIPS Act.

However, it's important to note that these discussions are still in the preliminary stages. The analyst report emphasizes that there is no confirmation of the deal, and if it were to move forward, the process could be lengthy.

Still, it is easy to imagine how a potential partnership between Intel and TSMC could significantly reshape the global chip market. By combining Intel's infrastructure with TSMC's expertise, Intel's position in advanced chip manufacturing would strengthen, narrowing the technological gap with TSMC. This would provide major tech companies with a viable alternative for leading-edge semiconductor production, diversifying the supply chain. This collaboration could also intensify competition in the chip manufacturing space, potentially leading to more competitive pricing and increased innovation.

However, these outcomes are only speculative and based on rumored discussions. The actual impact on the global chip market will depend on the specific terms of any agreement and the successful implementation of the partnership.

The potential Intel-TSMC partnership comes against the backdrop of increasing US government focus on domestic chip production. President Trump has been vocal about his desire to bring semiconductor manufacturing back to the United States.

While on his campaign trail, Trump has accused Taiwan of "stealing" the US chip business, referring to TSMC's dominant position in producing leading-edge chips for major tech companies like Apple and Nvidia. He expressed dissatisfaction with the current state of affairs, where a significant portion of advanced chip manufacturing occurs in Taiwan.

To incentivize the relocation of chip manufacturing to the US, the Trump administration has proposed imposing tariffs as high as 100 percent on foreign-made processors. This move has raised concerns about potential price increases for consumers, though Trump argues that any short-term disruptions would be outweighed by long-term benefits to the US economy.

In response to these developments, TSMC has already taken steps to increase its US presence. The company has approved an additional $17 billion in funding to boost its chip production, with a portion of this investment directed towards its operations in the United States.

Intel, Nasdaq and TSMC...On Friday, Jefferies maintained a "Hold" rating on Intel Corporation (NASDAQ:INTC) with a steady price target of $34.00. The stance comes after Intel shares surged 26.34% this week, pushing the stock into overbought territory, according to InvestingPro's technical indicators. With 26 analysts recently revising their earnings expectations lower, investors seeking deeper analysis can access detailed reports through InvestingPro. 

The rally followed announcements at the France AI Action Summit, where U.S. Vice President JD Vance highlighted the critical nature of developing powerful AI systems using chips designed and manufactured in the United States. As a prominent player in the semiconductor industry with $53.1B in revenue, Intel's strategic position is crucial, although InvestingPro data indicates the company faces profitability challenges with negative returns on invested capital. Jefferies analysis pointed to potential developments in the semiconductor industry, specifically involving Intel and TSMC (Taiwan Semiconductor Manufacturing Company). The US government has reportedly extended three proposals to TSMC to boost domestic chip production. With Intel’s market cap at $104.48B and a weak overall financial health score according to InvestingPro, such strategic initiatives could be crucial to the company’s future positioning in the semiconductor market. 

The first proposal, regarding the construction of an Advanced Packaging (AP) facility by TSMC in the US, is considered the most likely outcome, despite TSMC’s hesitations due to concerns about labor shortages and reduced profit margins. TSMC’s existing advanced semiconductor fab in Arizona marks progress, but is seen as insufficient to secure the US’s strategic position in the semiconductor industry, as these chips still require shipping overseas for packaging. A joint venture between Intel and TSMC could address Intel’s process technology challenges; However, such a collaboration is considered unlikely due to potential antitrust concerns. The analyst suggested that while these developments may be speculative, the mere possibility of a strategic shift in the industry could be influencing market dynamics, particularly impacting short positions.

In other recent news, Intel Corporation has been the subject of considerable attention. The company’s shares have been on an upward trajectory, marking the largest weekly increase in over twenty years. This rise follows the release of preliminary benchmarks for Intel’s new Arrow Lake-based Core Ultra 9 275HX processor, which showed promising performance against competitors.

In another development, analysts at Baird maintained a Neutral rating with a $20.00 price target on Intel shares. The discussion involves the possibility of the US government facilitating a partnership between Intel and Taiwan Semiconductor Manufacturing Company (TSMC), a strategy in line with Intel’s focus on its core manufacturing competency.

Additionally, Asma Aziz has been named General Manager of Intel Canada, a role in which she will lead the growth of Intel Canada’s business and implement a cohesive strategy across organizations.

However, the company also faces potential regulatory challenges, with reports indicating that Chinese regulators may launch a formal antitrust investigation into the company. These developments are part of an ongoing narrative for Intel as it navigates a complex global business environment.

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