TSMC still eyeing a slice of Intel’s foundry

According to Reuters, TSMC is exploring a strategic joint venture to operate Intel’s manufacturing capacity, limiting its ownership to less than 50% and potentially involving major American chip designers like AMD, Broadcom, NVIDIA, and Qualcomm. This initiative follows direct intervention from the Trump administration, which aims to revitalize domestic semiconductor manufacturing while retaining American control over critical technology infrastructure.

Under the proposed arrangement, Intel would spin off its Intel Foundry division, allowing TSMC to acquire a minority stake and invite partner companies as co-investors. Apple, TSMC’s largest customer, is not part of these discussions, indicating a careful strategic positioning amid competitive dynamics.

The endeavor faces significant challenges, both technical and operational. Intel’s manufacturing and real estate assets are valued around $108 billion, necessitating substantial capital commitments from potential partners. The technological integration poses major obstacles, as Intel and TSMC employ significantly different manufacturing processes, equipment configurations, and material requirements.

The negotiations, still in their early stages, require navigating complex technical, financial, and regulatory hurdles before any formal agreement can be reached. Intel has not confirmed any plans regarding a spin-off of its foundry division.

The discussions accelerated after the Trump administration encouraged TSMC to aid in reviving Intel, which has seen its stock value plummet over 50% within the past year. Intel announced a net loss of $18.8 billion for 2024, its first since 1986, largely due to significant impairments.

Trump threatens TSMC with tariffs even after $100B US investment

Intel’s foundry division, with property and plant equipment valued at $108 billion as of December 31, has become a focal point for its future. Following an uptick in Intel’s stock by 6% during early U.S. trading, shares of NVIDIA, AMD, Broadcom, and Qualcomm also rose between 1.18% and 6.64%, while TSMC’s shares increased by about 1.8% in Taiwan.

Sources indicate that TSMC’s joint venture proposal was presented to potential backers before the announcement of a $100 billion investment in the United States, which includes building five additional chip facilities. TSMC aims to have multiple chip designers as partners in the venture.

While several companies have shown interest in buying parts of Intel, the U.S. company has declined discussions regarding the separation of its chip design house from the foundry division. Qualcomm has withdrawn from earlier talks to purchase all or part of Intel.

Intel board members have supported a potential deal and engaged in negotiations with TSMC, although there is opposition from some executives. Former CEO Pat Gelsinger had made the foundry division a critical aspect of Intel’s recovery strategy but was ousted in December, leading to the appointment of two interim co-CEOs.

The collaboration challenges are considerable due to the different processes and equipment used by TSMC and Intel. Intel has previously partnered with Taiwan’s UMC and Israel’s Tower Semiconductor, which could serve as precedents for collaboration, though how the partnership would address trade secrets remains uncertain.

TSMC seeks partners in the joint venture who are also Intel’s advanced manufacturing customers. Recent reports indicate that NVIDIA and Broadcom are conducting manufacturing tests with Intel using its advanced 18A production techniques, with AMD also assessing compatibility with Intel’s manufacturing process. However, the 18A technology has been a contentious point during negotiations, as Intel has claimed its 18A manufacturing technology surpasses TSMC’s 2-nanometer process.

Featured image credit: TSMC