Intel Corporation and Taiwan Semiconductor Manufacturing Company (TSMC) have reportedly reached a preliminary agreement to form a joint venture aimed at revitalizing Intel’s chip manufacturing facilities in the United States. According to a report by The Information, TSMC is set to acquire a 20% stake in this new entity.
Background and Strategic Implications
This development follows mounting pressure from U.S. government officials for both companies to address Intel’s ongoing challenges in the semiconductor sector. In 2024, Intel reported its first annual net loss since 1986, amounting to $18.8 billion. The company has faced significant hurdles, including missing out on the AI-driven chip boom and delivering services that have been perceived as inferior to those of TSMC. In response, Intel appointed industry veteran Lip-Bu Tan as CEO in an effort to steer the company back on course.
TSMC’s Expanding U.S. Presence
TSMC has been actively expanding its footprint in the United States. In April 2024, the Biden-Harris Administration announced preliminary terms with TSMC, including up to $6.6 billion in proposed direct funding under the CHIPS and Science Act. This funding supports TSMC’s investment of more than $65 billion in three leading-edge fabs in Phoenix, Arizona, aimed at manufacturing advanced semiconductors. Additionally, TSMC has announced plans to build five additional chip plants, further solidifying its commitment to U.S. semiconductor manufacturing.
Market Reactions and Analyst Perspectives
The announcement of the joint venture has elicited mixed reactions in the financial markets. Intel’s stock experienced a decline of 8.2%, closing at $20.60, largely attributed to escalating trade tensions following China’s imposition of a 34% tariff on all U.S. goods starting April 10. TSMC’s American depositary receipts also fell by 4.9%.
Analysts have offered varying perspectives on the potential impact of the joint venture. Some view it as a strategic move that could align with U.S. government objectives to bolster domestic semiconductor production. However, concerns remain about Intel’s ability to remain competitive against TSMC. UBS analyst Timothy Arcuri maintained a neutral rating with a $23 price target for Intel, while BNP Paribas Exane’s David O’Connor questioned the feasibility of Intel continuing to pursue advanced chip manufacturing independently.
Official Statements and Future Outlook
As of now, neither Intel, TSMC, nor the White House has issued official comments regarding the reported agreement. The semiconductor industry continues to navigate a complex landscape marked by rapid technological advancements and geopolitical considerations. The proposed joint venture between Intel and TSMC represents a significant development in efforts to strengthen U.S. capabilities in semiconductor manufacturing.​
