TSMC has reportedly proposed a joint venture between itself, Nvidia, Advanced Micro Devices (AMD) and Broadcom that will involve them owning stakes and operating Intel’s factories.
The proposal comes after Donald Trump’s administration urged TSMC to help turn Intel’s situation around for the better. The talks are still at an early stage, but if they succeed, the troubled Intel will have better days ahead.
The details of TSMC’s proposal
According to the proposal, TSMC, the world’s leading chipmaker will take over the operations of Intel’s foundry division, which makes chips tailored to the needs of its customers. However, it will not be allowed to own more than 50%, according to anonymous sources with knowledge of the matter.
This is most likely a buffer to deter TSMC, a foreign-owned company from owning a controlling stake in Intel, which is considered a national treasure at this point.
The talks, which are going on behind closed doors, follow President Donald Trump’s administration request to TSMC to help save the troubled US industrial icon. While the story has been extensively covered in the past, details of the plan barring TSMC from taking no more than a 50% stake and its overtures to potential partners are being reported for the first time.
When they finally reach a consensus on how best to proceed, they would need approval from the Trump administration, which has been very clear about not wanting Intel or its foundry division to be completely under foreign management.
According to Reuters, all parties involved are keeping hush, not sharing any revealing comments. What is at stake is the future of America’s chipmaking giant, whose shares have lost more than half of their value in the last year.
The TSMC merger could still hit hurdles
Trump is very interested in the revival of Intel’s fortunes, a phenomenon he believes will boost American advanced manufacturing and, ultimately the economy.
The sources close to the situation say that potential backers heard TSMC’s joint venture pitch before the Taiwanese chipmaker announced on March 3 that the company would make a fresh $100 billion investment in the United States that would see the building of five additional chip facilities on US soil in coming years.
The talks about the joint venture over Intel’s foundry division have continued under the radar ever since, with TSMC looking to have more than one chip designer partner. However, the deal could still face some issues.
TSMC is not the only company interested in Intel. Other companies have expressed a desire to own parts of Intel; however, according to two of the four sources, the American company has turned down those offers, refusing to sell its chip design house separately from the foundry division.
Meanwhile, Qualcomm, which received an early proposal from TSMC, has exited earlier discussions to buy all or part of Intel, according to the three sources and a separate source.
Also, within Intel, there is an ongoing tug of war between the board members who have backed a deal and held negotiations with TSMC and some executives who are firmly opposed, according to two sources.
Intel’s foundry division played a huge role in former CEO Pat Gelsinger’s efforts to keep Intel afloat. Gelsinger was dismissed by the board in December, and it named two interim co-CEOs in his place.
Reaching a suitable agreement between TSMC and Intel, two rivals, won’t be easy. Even if they reach an agreement, the sources claim it would be costly and difficult in practice.
Both companies currently utilize very different manufacturing processes, chemicals, and chipmaking tool setups at their respective factories.
In the past, Intel had manufacturing partnerships with Taiwan’s UMC and Israel’s Tower Semiconductor, which could offer a future precedent for the two companies to operate together. However, how such a partnership would work regarding trade manufacturing secrets remains unclear.
There is also the matter of compatibility. According to a Reuters report last week, which cited sources, Nvidia and Broadcom are running manufacturing tests with Intel’s most advanced production techniques, known as 18A, to see if it works for them.
AMD is also evaluating whether Intel’s 18A manufacturing process will work for it. The production technique, which Intel takes prides in, has been an area of contention in the negotiations between it and TSMC.
Intel executives are convinced that the company’s 18A manufacturing technology is superior to TSMC’s 2-nanometer process, and they said as much during talks in February.
Intel suffered a steady decline
Intel was considered the giant in the CPU industry for many years. However, thanks to the AI boom and the company’s failure to come up with strategies that would allow it to benefit from current trends, it is now struggling.
One big mistake Intel has made is its refusal to pick a struggle. Its inability to focus solely on manufacturing or designing chips has seen its chip-making endeavors eclipsed by TSMC.
The American industrial icon also faced some issues with quality last year, which led to a recorded net loss of $18.8 billion, its first since 1986, and much of it was caused by large impairments. This caused it to drop from first to second on Gartner’s list of top global semiconductor vendors by revenue growth.
The foundry division’s property and plant equipment had a book value of $108 billion as of December 31, according to a company filing. If the deal with TSMC comes through, Intel would have a second chance at life. However, whether or not both companies will be able to actually work together remains to be seen.
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