Intel Corporation (NASDAQ: INTC) and Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) are reportedly in discussions over a potential joint venture to operate Intel’s foundries. Despite TSMC’s recent $100 billion U.S. investment announcement, Wolfe Research believes this move remains the “best option” for Intel’s long-term strategy.
A Strategic Shift for Intel
Wolfe Research analyst Chris Caso noted that Intel has struggled to fully load its fabrication plants and that a partnership with TSMC would present the “highest probability and lowest risk” solution. Caso stated in a client note that if Intel can successfully implement TSMC’s advanced manufacturing processes within its facilities, the collaboration could become a defining moment in the semiconductor industry.
Intel has long sought to strengthen its position in the semiconductor manufacturing space, but the rise of competitors such as Advanced Micro Devices (NASDAQ: AMD), Nvidia (NASDAQ: NVDA), and Qualcomm (NASDAQ: QCOM) has pressured the company to rethink its strategy. By aligning with TSMC, Intel could potentially gain access to cutting-edge processes while reducing its reliance on internal production.
Industry Giants Eyeing Investment
Reports indicate that several key semiconductor players, including AMD, Nvidia, Qualcomm, and Broadcom (NASDAQ: AVGO), are considering investments in this joint venture. While neither TSMC nor Nvidia has provided an official comment, the involvement of these major industry players underscores the potential significance of the deal.
Unanswered Questions Surrounding the Deal
Despite the promising outlook, several uncertainties remain. Caso highlights critical concerns for Intel, such as:
- The impact on Intel’s product division and whether it would be subject to fixed take-or-pay agreements with the joint venture.
- The potential underutilization of Intel’s fabs in the transition period before TSMC’s processes become fully operational.
- The fate of Intel’s previously announced private equity partnerships, including its agreements with Apollo Global Management (NYSE: APO).
What This Means for Taiwan Semiconductor
For TSMC, a joint venture with Intel would provide “much-needed” U.S. manufacturing capacity, complementing its recent $100 billion expansion. Additionally, the partnership could effectively eliminate Intel as a direct competitor in the foundry space, further strengthening TSMC’s market dominance.
With discussions reportedly ongoing, the potential collaboration between Intel and TSMC could redefine the semiconductor industry, bringing new efficiencies and partnerships while reshaping competitive dynamics.
