Investment Bank Suggests Intel’s TSMC Joint Venture Improbable as TSMC May Focus on Building a Packaging Factory

This article does not constitute investment advice. The author has no vested interest in any of the stocks mentioned.

Potential Antitrust Issues Loom Over Intel and TSMC’s Rumored Partnership

Recent speculation about a partnership between Intel Corporation and the Taiwan Semiconductor Manufacturing Company (TSMC) aimed at enhancing semiconductor manufacturing in the U. S.may be met with antitrust scrutiny, according to analysts at investment bank Jefferies. Intel’s stock surged by 25% in just five days following comments from Vice President JD Vance, who suggested the administration’s commitment to developing cutting-edge artificial intelligence (AI) semiconductors domestically. This surge reflects investor optimism about Intel regaining its edge in manufacturing technology.

Shift in Strategy Post-Leadership Changes at Intel

Intel’s ongoing manufacturing challenges have escalated the urgency for the company to ramp up production of its high-volume 18A products and secure new foundry contracts. Since former CEO Patrick Gelsinger’s unexpected exit last year, there have been rumors regarding a possible spin-off of Intel’s manufacturing operations, which could allow the company to focus solely on chip design and financial optimization.

Speculation Surrounds TSMC’s Expansion Plans in the U. S.

Following Vance’s remarks at an AI summit, Intel’s stock price has experienced a remarkable increase, fueled by speculation surrounding a TSMC meeting held in the U. S.Investors are hopeful that the current political climate could influence TSMC to collaborate with Intel, potentially establishing a joint venture that would accelerate advanced chip production domestically.

Intel's revenue by segment during Q4 2024 — Intel’s revenue by segment during Q4 2024. Image: Intel Corporation

Jefferies Outlines Possible Outcomes for Intel and TSMC

In light of the unfolding events, Jefferies has outlined three potential scenarios arising from the Trump administration’s approach to semiconductor manufacturing. These scenarios include:

TSMC establishing a new packaging facility within the United States.
Collaboration between TSMC and Intel to facilitate advanced chip manufacturing technology transfer to the U. S.
Intel gaining control over TSMC’s packaging contracts.

Addressing Packaging Bottlenecks in Advanced Chip Production

The issue of packaging has become a significant bottleneck for TSMC’s capacity to produce advanced chips on U. S.soil. Although TSMC’s facility in Arizona is equipped to manufacture chips using 4-nanometer technology, those chips must currently be sent to Taiwan for packaging before returning to the U. S.In contrast, Intel has maintained effective packaging capabilities, unaffected by the same delays plaguing its advanced manufacturing processes.

Industry Insights on Future Chip Production

Jefferies posits that TSMC setting up a U. S.packaging facility is the more probable scenario than a joint venture with Intel. This move would significantly alleviate a crucial hurdle in TSMC’s advanced manufacturing workflow and contribute to the production of state-of-the-art AI chips in America, aligning with Vance’s objectives.

It’s important to note that while TSMC’s pioneering 2-nanometer technology can only be realized in Taiwan, AI chip production often utilizes older nodes due to their increased power consumption. Consequently, TSMC’s Arizona site is capable of producing high-end products, particularly for GPU leader NVIDIA Corporation.

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