Baird Highlights Supply Chain Rumors of TSMC Engineering Support for Intel’s 3nm/2nm Fabrication, Citi Observes Intel’s Microprocessor Market Share Hits Lowest Level Since 2002

The following information does not constitute investment advice. The author does not hold any positions in the stocks mentioned herein.

Intel’s Leadership Transition: A Pivotal Moment

Following the unexpected departure of Pat Gelsinger in late 2024, Intel is currently navigating a period of uncertainty under the atypical management of two interim co-CEOs. The company is at a crucial juncture: should it commit to Gelsinger’s aggressive focus on chip fabrication, or should it pursue strategies to regain shareholder value, potentially by divesting its manufacturing facilities? Recently, insights from Baird have pointed to the emerging dynamics surrounding this pivotal decision.

Insights from Baird: A Shift Towards Collaboration

Baird analyst Tristan Gerra reported in a recent investment note on “discussions from the Asia supply chain.”These conversations suggest a potential shift at Intel towards closer cooperation with TSMC, aimed at revitalizing its underperforming fabrication units. Gerra stated:

“There are discussions from the Asia supply chain that the U. S.government will get involved in potentially the following: TSMC would send engineers to Intel’s 3nm/2nm fab, applying the company’s know-how to ensure that the fab and subsequent manufacturing projects from Intel become viable.”

Prospective Joint Ventures and Funding Opportunities

Gerra further elaborated on possible outcomes of this collaboration:

“The fab could be spun off into a new entity jointly owned by TSMC and Intel, and run by TSMC.”

While acknowledging the absence of formal confirmation and recognizing that the completion of such a project might take significant time, Gerra expressed optimism about this approach. It would align well with current market conditions, particularly as the newly formed entity could tap into CHIPS Act funding.

Repositioning Business Focus

If this collaborative strategy comes to fruition, Intel may shift its primary focus towards chip design and platform solutions, allowing TSMC to handle the complexities of chip manufacturing. This change could lead to considerable cost savings for Intel.

Market Share Analysis: A Critical Perspective

An analysis by Citi, utilizing data from Mercury Research, paints a concerning picture of Intel’s dwindling market share. Reports indicate that Intel recorded a 1.04% decline in microprocessor shipments for the fourth quarter of 2024, bringing its market share down to 67.4%.This marks the lowest share reflected in their models since 2002, illustrating the substantial competitive pressures faced by the company.

In contrast, AMD has capitalized on Intel’s struggles, increasing its microprocessor market share by 0.53% to reach 22.1%.However, there is a slight silver lining for Intel; it experienced a rise in its desktop market share:

“Intel’s desktop MPU share was up 166 basis points QoQ from 66.4% in 3Q24 to 68.1% in 4Q24.”

Congressional Interest: A Potential Indicator?

Notably, Intel emerged as the fifth most purchased stock among members of Congress in 2024. Recorded transactions involved three Congress members making eight purchases throughout the year. This trend may provide intriguing insights for investors who consider tracking the trading patterns of government officials as a means to identify potential market opportunities.

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