TSMC will not take over the chipmaking operations of struggling U.S. rival Intel, according to industry analysts.

TSMC is considering taking a controlling stake in Intel Foundry as urged by U.S. President Donald Trump’s administration, according to a Bloomberg report last week, citing one person close to the matter. A few days later, the Wall Street Journal reported that Broadcom is interested in buying Intel Products if a potential investor takes over Intel Foundry.

Intel has divided itself into two entities, with one in charge of products and the other foundry production, as the largest U.S. chipmaker aims to reverse its decline. The sudden departure of Pat Gelsinger as the CEO of Intel in December has left the struggling U.S. chipmaker adrift, still searching for a new CEO.

The Trump administration aims to revive America’s chip industry, vowing to levy tariffs on imported semiconductors just as it squeezes Taiwanese government officials to attract more investment from TSMC, which makes more than 90% of the world’s most advanced chips. The reported plan to pair TSMC with Intel will fizzle, according to Handel Jones, CEO of International Business Strategies (IBS), which advises electronics companies and investors.

“The U.S. government wants the U.S. to have large capacity in the U.S. at under 2 nanometers, and this is appropriate,” he told EE Times. “The key is the level of commitment that TSMC will make to capacity in the U.S. TSMC has no interest in the wafer-fab facilities of Intel. We talk with both companies on an almost real-time basis.”

Intel and TSMC declined to comment on the matter.

“There is no reason for TSMC to help Intel, other than the uncertainty around President Trump’s ask,” TechInsights vice chair Dan Hutcheson told EE Times. “Intel can manage its own fabs, and 18A is coming along nicely. What Intel needs is to fill its fabs.”

Taking on Intel Foundry would be a “battleship anchor” on TSMC’s bottom line, Hutcheson added.

“TSMC is in the most delicate of geopolitical positions and has to answer the phone when Washington calls, however bad the request could be,” said Paul Triolo, who advises global tech clients at Washington, D.C.-based Albright Stonebridge Group. TSMC had to acquiesce to Washington before when it stopped selling chips to China’s Huawei, agreed to build fabs in Arizona and now considers helping Intel, he added.

Intel is better positioned to sell non-core units like Altera and Mobileye than it is to seek acquisitions, according to analysts whom EE Times contacted last year.

In September, Qualcomm proposed a potential buyout to Intel, according to reports in the Wall Street Journal and the Financial Times. Since that time, nothing has happened on the Qualcomm/Intel front.

TSMC could help Intel ramp up foundry services for cutting-edge design firms like Nvidia, Qualcomm and Broadcom to sign on as customers, Triolo said.

“Who decides which customers use which foundry services?” he asked. “This is not a simple question, as it would involve a lot more collaboration between Intel, TSMC and leading design houses. Trump administration officials have not had enough time to look at the issue in sufficient depth, and this effort is very preliminary,”

Overarching aim

The Trump administration’s overarching aim is for more U.S. investment from TSMC, according to C.Y. Huang, president of FCC Partners, an investment bank based in Taiwan.

The administration will urge TSMC to increase its currently planned $65 billion investment in two fabs in Arizona to at least $200 billion and five fabs, Huang said in a post on LinkedIn. That would include a push for TSMC to move its CoWoS advanced-packaging technology to the U.S., he added. In Taiwan, TSMC uses CoWoS to make AI chips for Nvidia and a handful of other chip designers.

“Trump’s deal-making extends beyond intimidation,” Huang said. “He’s shown a willingness to demand staggering sums in exchange for ‘protection’ or to propose radical relocation projects—anything that realizes his vision of U.S. global dominance. Semiconductors and AI are the heart of the U.S.-China rivalry, so expect him to play every card.”

Taiwan is caught in the middle of the tech war between the U.S. and China. The island nation is not officially recognized by the U.S. or China, yet has made itself an indispensable supplier of the world’s most advanced semiconductors.

President Trump clinched the deal with TSMC to invest in Arizona during his first administration. Part of the deal included a commitment to stop making chips for China’s Huawei. Now that TSMC has made the investment in Arizona, there is no backing out, Hutcheson said. “TSMC has to consider the offer. It’s an offer they can’t outright refuse. What’s at play for them is TSMC Arizona becoming one of those holes in the desert Robert De Niro talked about in the movie Casino.”

The move by the Trump administration leaves room for TSMC to negotiate, according to Triolo.

“TSMC would probably require some guarantees on things like extended tax credits for its Arizona fabs. Potentially, TSMC could also demand some leeway for its fabs in China, such as upgrading them to some more advanced process nodes to keep pace with domestic demand in China.”

TSMC has very few bargaining chips with Trump, Hutcheson said.

“They can threaten to exit the U.S. and support China. But China is less than 10% of their sales and is shrinking. Shutting down American fabs would be unbearably costly.”

SemiAnalysis analyst Jeff Koch declined to comment on the matter, citing non-disclosure agreements. Instead, he pointed to a Dec. 9 report saying that Intel is on the brink of death. “Intel Foundry is the most important part of the company, and it must be saved,” the SemiAnalysis report said. “Intel Foundry is the future of Intel. It has massive strategic value to the United States and the Western Hemisphere. Leading-edge semiconductors are critical to consumer, industrial and military applications, yet the West has no ability to produce them at scale.”

Intel expects to start production of its 18A chips this year, bringing its process technology on a par with TSMC’s 2-nm node. Still, Intel has slowed the schedule and scrapped products made on the 18A process.

National security

TSMC is the only high-volume manufacturer, and the Taiwanese government has said it will not allow offshore production of the latest node, SemiAnalysis said. The Arizona project has a capacity of less than a fifth of that in Taiwan at 5 nm and 3 nm, the report said, adding that as Arizona soon falls two process nodes behind the leading edge, more supply will be needed to achieve any level of national security.

Intel is critical to the U.S. government’s aim to gain leadership in the supply of leading-edge chips for military use.

Defense contractors Boeing and Northrop Grumman have joined Intel in the Department of Defense’s Rapid Assured Microelectronics Prototypes-Commercial (RAMP-C) program. IBM, Nvidia, Microsoft and Qualcomm are existing RAMP-C partners with Intel Foundry that have been designing test chips using Intel’s 18A process to be “manufacturing ready” by the second half of 2024, Gelsinger said in 2023.

The U.S. Department of Defense depends on Asian chip supplies because of a dearth of investments in domestic production capacity, according to industry insiders and government observers.

CHIPS Act

Trump has criticized the CHIPS Act subsidies enacted by his predecessor Joe Biden. That could jeopardize the $6.6 billion in grants and up to $5 billion in loans announced by the Biden administration for TSMC to build a third chip factory in Arizona. Trump called the CHIPS Act “so bad,” without providing details.

The Biden administration also awarded Intel up to $7.86 billion in direct funding through the CHIPS Act, the largest amount for any chipmaker. One condition of the award requires Intel to keep a majority share of its fabs if they are spun off into a new entity.

Frank Yeary, the interim executive chairman of Intel, has led talks with potential investors and Trump administration officials, the Wall Street Journal report said.

“If the reports are correct, Yeary appears to be coming from a private-equity perspective where the solution is simply a short financial one that ignores long-term infrastructure needs,” Hutcheson said. “If this short-sighted solution occurs, I would predict that Intel’s massive process R&D capabilities will be hollowed out and eventually shut down, as they would be duplicative to what TSMC does in Taiwan.”

A White House official said President Trump was unlikely to support a deal that involves a foreign entity like TSMC operating Intel’s factories, the Wall Street Journal report added.

“The TSMC role appears to be somewhat problematic as the Trump administration is eager to avoid the appearance that it is allowing a foreign technology giant in the door to run the U.S. operations of a U.S. national champion,” Triolo said. “China would be in a position to scuttle any type of merger and acquisition, unless the Trump administration decided to ignore Beijing’s traditional review.”

There is no chance of an agreement, Hutcheson said.

“It’s only good in the interest of Intel’s self-inflicted financial situation. It hurts America’s national-security interests. It is not in TSMC’s interests. Why save your drowning chief competitor when you’ll have a monopoly once they’re gone?”

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved