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Published : 16 Feb 2025, 09:31 AM
President Donald Trump's administration may not support Intel's US chip factories being operated by a foreign entity, a White House official told Reuters.
The comment was in response to a Bloomberg report that Taiwan's TSMC, the world's biggest chipmaker, was considering taking a controlling stake in Intel's factories at Trump's request.
The White House official said the Trump administration supports foreign companies investing and building in the US but is "unlikely" to support a foreign firm operating Intel's factories.
Earlier, Bloomberg had reported that Trump's team raised the idea of a deal between the two firms in recent meetings with officials from TSMC, and that they were receptive, citing a person familiar with the matter.
The White House official did not immediately comment on whether Trump's team met with the companies and raised the idea of such a deal. The official did not immediately respond to follow-up questions about whether TSMC could be involved with Intel's factories through a joint entity headquartered in the United States.
Such a deal, which is still uncertain, could throw a financial lifeline to Intel, which has struggled to restore its lost chipmaking glory as it failed to capitalize on an AI boom and poured billions of dollars into becoming a contract chip manufacturer - a transformation that is yet to materialize.
Intel shares closed down 2.2% on Friday, while TSMC's US-listed shares closed up about 1%.
It is unclear whether Intel is open to a transaction, according to Bloomberg, and the arrangement may involve having major American chip designers take equity stakes, along with support from the US government. The report added that it meant the venture would not solely be owned by a foreign company.
Earlier in the week research firm Baird published a note saying Intel's factories could be spun out into a new entity, jointly owned by Intel and TSMC, with TSMC's engineers helping ensure the factories are viable.
"Intel would benefit from significant cash flow relief, and would focus on design and platform solutions going forward, while a viable fab could finally attract key fabless companies to diversify into a geo-dependable manufacturing mode," Baird said in the note.
Such a deal would need deep concessions on both sides.
Should TSMC accept an arrangement to run Intel's factories, it would have to make significant changes to the U.S. chipmaker's operations because each chip manufacturer has distinct methods and techniques for operating factories.
To operate Intel's fabs, TSMC would also likely need to reveal some of its proprietary techniques and processes to Intel employees.
On its part, Intel would have to concede the fact that its manufacturing operations would become a totally different entity.
As well, TSMC fully operating Intel's factories, known as fabs, also raises questions about Intel's key strategy of manufacturing the chips it has designed. Most chipmakers are "fabless" - outsourcing to the likes of TSMC, which offers considerable cost savings.
"If Intel moves down this path, you focus on being a semiconductor design company. So you end up looking more like a Broadcom or a Marvell or an AMD," Wedbush Securities analyst Matthew Bryson said.
TSMC and Intel declined to comment.
TARIFF EXEMPTIONS?
Intel is among the largest beneficiaries of the United States' push to onshore critical chip manufacturing.
Under the previous administration, the US Commerce Department in November said it was finalising a $7.86 billion government subsidy for Intel.
The company is among a few chipmakers that both design and manufacture semiconductors. TSMC is now the world's largest contract chipmaker, which boasts a market valuation about eight times larger than that of Intel.
The Taiwanese contract chipmaker's customers include AI chip leader Nvidia and AMD, which is Intel's fierce rival in PC and server markets.
"Ironically, enough, TSMC might look for some tariff exemptions in order to make this happen and allow for efficient and effective flow of equipment and materials," said Michael Ashley Schulman, chief investment officer at Running Point Capital.
Trump tasked his economics team on Thursday to come up with plans for reciprocal tariffs on every country taxing US imports, ramping up prospects for a global trade war.
Former Intel CEO Pat Gelsinger, who was ousted last year, set sky-high expectations for Intel's manufacturing and AI capabilities among major clients but fell short, losing or canceling contracts, Reuters had previously reported.
Intel's shares lost about 60% of their value last year as the capital-intensive bid to bolster manufacturing - a strategy championed by Gelsinger - strained the company's cash flow and ultimately led to it cutting about 15% of its workforce.
The success of Intel's 18A chipmaking technology, slated for this year, is key to the company's manufacturing ambitions.
