U.S. to Push Intel, TSMC to Form Joint Chip Foundry

According to reports, Baird analyst Tristan Gerra stated on Wednesday (12th) that rumors are circulating in the securities industry suggesting that the U.S. government has requested semiconductor giants Intel and TSMC to form a joint venture. The goal would be to jointly develop and operate multiple chip foundry projects within the United States.

TSMC ADR (TSM-US) dropped 1.13%, reaching $206.38 per share, while Intel (INTC-US) surged 7.20%, closing at $22.48 per share, marking a third consecutive day of gains.

Gerra revealed that discussions within the Asian supply chain are exploring the possibility of Intel spinning off its semiconductor manufacturing division to form a joint venture with TSMC, the leading player in the wafer foundry market.

Under the proposal, U.S. government officials would request Intel to contribute its existing and under-construction 3nm and 2nm chip manufacturing projects in the U.S. to the joint venture. TSMC would provide its expertise in semiconductor engineering and advanced technology, helping to produce cutting-edge 3nm and 2nm chips in the U.S. The move would ensure a stable domestic chip supply while benefiting from federal subsidies under the CHIPS Act.

Intel's foundry business, "Intel Foundry," has already been operating separately from the company's other divisions, and market analysts have long anticipated a spin-off of its foundry business.

Gerra believes the rumors are credible, as the spin-off could provide Intel with substantial cash flow relief, allowing the company to focus more on its design and platform solutions. Additionally, a successful foundry operation could attract key fabless companies looking for reliable, geographically strategic manufacturing alternatives.

While the analyst is optimistic about the potential of such a deal, he maintains a neutral rating on Intel with a target price of $20.

As of the time of this report, neither Intel nor TSMC has confirmed or denied the speculation.

Intel's fiscal fourth-quarter results for 2024, released on January 30, showed a 7% year-over-year decline in revenue to $14.26 billion, marking a third consecutive quarterly decline. However, this result surpassed market expectations of $13.81 billion. Adjusted earnings per share (EPS) came in at $0.13, better than the expected $0.12. However, net income fell sharply from $2.687 billion a year ago to a loss of $130 million.