Intel (INTC) and TSMC (TSM) have reportedly come to a preliminary agreement that may help revitalize Intel's struggling foundry business. According to reports, the companies are planning to establish a joint venture involving other US semiconductor companies to operate Intel's semiconductor manufacturing facilities.
News of the potential partnership caused Intel's shares to rise by 2.9%.
TSMC is expected to hold a 20% stake in the new entity, with Intel and other investors controlling the majority. As part of the deal, TSMC would share insights on chip manufacturing processes and provide training support for Intel's personnel.
While the agreement is not yet final and its realization remains uncertain, former Intel CEO Pat Gelsinger aimed to transform the foundry into a third-party manufacturer similar to TSMC. However, the division is experiencing financial losses, with a reported operating deficit of $13.4 billion in 2024. Intel projects that its foundry business will not break even until 2027.
TSMC, renowned as the largest chip manufacturer globally, has surpassed Intel in advanced chip manufacturing capabilities. The company produces chips for Intel's competitors like AMD and Nvidia, as well as Apple.
Intel has indicated that Microsoft and Amazon will utilize its foundries and technologies to develop custom chips. Despite these collaborations, Intel's losses persist, leading to a significant 50% drop in its shares over the past year due to declining quarterly revenue.
By collaborating with TSMC, Intel stands to benefit from a major competitor. Both companies are being urged by the Trump administration to enhance chip manufacturing capacity in the US.
Both Intel and TSMC have announced substantial investments in the US and are receiving funding from the CHIPS Act. However, existing facilities are insufficient to meet the US's overall chip demand.
Recently appointed Intel CEO, Lip-Bu Tan, emphasized his commitment to bolstering Intel's foundry business. During a keynote speech at Intel Vision 2025, he highlighted the importance of responding to the growing global demand for chip production with flexible, resilient, and secure supply chains. Tan vowed to advance Intel's foundry strategy to address these requirements.