TSMC Proposes Joint Venture to Revitalize Intel
In a significant move for the semiconductor industry, Taiwan Semiconductor Manufacturing Company (TSMC) has approached major US chip designers, including Nvidia, Advanced Micro Devices (AMD), and Broadcom, to explore potential stakes in a joint venture aimed at operating Intel’s foundry division. This initiative comes amid Intel’s financial struggles, with the company reporting its first net loss since 1986, prompting US government interest in revitalizing the iconic chipmaker.
TSMC’s Strategic Proposal
Sources familiar with the discussions reveal that TSMC’s proposal involves managing Intel’s foundry operations without exceeding a 50% ownership stake. This arrangement is designed to align with US government preferences, as officials seek to prevent Intel’s foundry division from being fully foreign-owned. Qualcomm has also been approached regarding participation in this venture, highlighting TSMC’s intent to partner with multiple chip designers. The talks are still in their early stages, but they follow a request from the Trump administration for TSMC to assist in turning around Intel’s fortunes. The urgency of these discussions is underscored by Intel’s recent financial performance, which has seen its stock value plummet by over 50% in the past year. The company reported a staggering net loss of $18.8 billion for 2024, driven by significant impairments, raising concerns about its long-term viability.
Intel’s Financial Challenges
Intel’s foundry division, which has a reported book value of $108 billion, is at the center of these discussions. The division was crucial to former CEO Pat Gelsinger’s strategy to restore Intel’s competitive edge. However, Gelsinger’s departure in December has left the company in a precarious position, with interim leadership now at the helm. The board has shown support for a potential deal with TSMC, although internal disagreements persist regarding the direction of the company. Despite interest from various companies in acquiring parts of Intel, the chipmaker has reportedly rejected offers to sell its design house separately from its foundry operations. Qualcomm, which previously considered acquiring Intel, has since withdrawn from negotiations. This reflects the complex landscape of the semiconductor industry, where partnerships and acquisitions are fraught with challenges.
Potential Roadblocks and Future Prospects
While the prospect of a joint venture between TSMC and Intel is intriguing, significant hurdles remain. The two companies currently operate using different manufacturing processes and technologies, which could complicate collaboration. Previous partnerships Intel had with Taiwan’s UMC and Israel’s Tower Semiconductor may provide some precedent, but the integration of trade secrets and manufacturing techniques poses a substantial challenge.
Moreover, TSMC is keen on involving investors in the joint venture who are also customers of Intel’s advanced manufacturing services. Recent reports indicate that Nvidia and Broadcom are conducting manufacturing tests with Intel, utilizing its advanced 18A production techniques. However, negotiations over the 18A technology have been contentious, with Intel asserting its superiority over TSMC’s 2-nanometer process.
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