TSMC and Intel's Potential for a Semiconductor Revolution
The global semiconductor industry is undergoing a period of strategic realignment as geopolitical tensions and supply chain vulnerabilities push manufacturers to reconsider their production footprints.
As a result, a potential reshaping of chip manufacturing is emerging that could alter the balance of power in the industry.
Now, the world's largest contract semiconductor manufacturer, TSMC, has approached major US chip designers: Nvidia, Advanced Micro Devices (AMD) and Broadcom about taking stakes in a joint venture that would operate Intel's factories, according to a report in Reuters.
This move comes as the Biden administration has pushed for increased domestic semiconductor production through the CHIPS Act, which provides
US$52bn in subsidies for US chip manufacturing, while the Trump administration had previously pursued similar goals of technological self-sufficiency.
The potential collaboration between TSMC and Intel, once fierce competitors in different segments of the chip industry, shows a shift in industry dynamics as firms adapt to increasing demands for advanced semiconductor manufacturing capacity amid global shortages and growing competition from China.
What is TSMC’s proposal?
Under the proposal, TSMC would manage Intel's chip manufacturing operations but would maintain a stake of no more than 50%.
The discussions come amid growing concerns about Intel's financial health, with the US chipmaking pioneer reporting an US$18.8bn net loss for 2024 – its first annual loss since 1986.
The foundry division was central to former Chief Executive Officer Pat Gelsinger's strategy to revive Intel – yet his replacements have shelved plans for Intel's forthcoming AI processor.
Intel's foundry division, which produces customised semiconductors for external clients, holds assets valued at US$108bn as of 31 December.
Trump administration involvement influences TSMC and Intel negotiations
The talks were initiated after the administration of US President Donald Trump requested TSMC's assistance in revitalising Intel, the sources say.
Any agreement would require approval from the White House, which does not want Intel or its foundry business to fall under complete foreign control.
TSMC's approach to potential partners occurred before the chipmaker announced a fresh US$100bn investment in the US on 3 March, which includes plans to build five additional semiconductor facilities in the country over the coming years.
Now, the company is seeking multiple chip designers as partners in the joint venture – wanting these investors to become customers of Intel's advanced manufacturing processes, according to one source.
Multiple companies have expressed interest in buying parts of Intel, however, Intel has rejected discussions about selling its chip design business separately from the foundry division, two of the four sources said.
Qualcomm has also withdrawn from earlier talks about acquiring all or part of Intel, according to those sources and a separate person familiar with the matter.
Intel board and TSMC face technical challenges in potential collaboration
A partnership between TSMC and Intel would face significant technical obstacles.
For instance, the companies currently employ different manufacturing processes, chemicals and equipment configurations at their factories, according to separate sources within both firms.
Intel's previous manufacturing partnerships with Taiwan's United Microelectronics Corporation (UMC) and Israel's Tower Semiconductor might provide a template for collaboration, though questions remain about how the companies would protect their manufacturing trade secrets.
Technical disagreements have also already emerged during preliminary talks.
In February discussions, Intel executives told TSMC that Intel's advanced 18A manufacturing technology was superior to TSMC's 2-nanometer process, two sources reported.
The 18A manufacturing process, which represents Intel's most sophisticated production technique, has been central to recent testing by potential customers.
Furthermore, Reuters reported last week that Nvidia and Broadcom are conducting manufacturing trials with Intel using the 18A process – AMD is also evaluating whether Intel's 18A production capabilities meet its requirements.
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