Intel Corp (NASDAQ:INTC, ETR:INL) and Taiwan Semiconductor Manufacturing Co (ADR) (NYSE:TSM) (TSMC) have reportedly reached a preliminary agreement to form a joint venture (JV) that may mark a turning point in Intel’s ambitious foundry strategy, analysts at UBS believe.
Per media reports, TSMC would acquire its 20% stake through the contribution of technology and personnel, versus capital investment.
The UBS analysts noted that the structure resembles the long-rumored American Semiconductor Manufacturing Corp (ASMC), a Silicon Valley-backed idea in which other US tech giants like Apple, Nvidia, and Qualcomm may also become shareholders.
“The collaboration aligns with the Trump Administration's interest in boosting domestic semiconductor production as policymakers have encouraged partnerships to ensure more advanced chips are made in the US,” they wrote.
“TSMC's motivation for such an agreement (beyond potential geopolitical factors) is unclear to us, but this would infuse capital and operational know-how into Intel's foundry efforts, potentially ultimately facilitating the separation of the foundry and product businesses.”
What the deal means for Intel
Analysts see the JV serving as a financial and operational bridge for Intel as it works to make its foundry business more competitive.
“While TSMC would reportedly not be contributing capital to this structure, Intel would be getting some investment from other parties which would help build this ‘bridge’ to 14A and add some confidence for other potential customers to start engaging with Intel foundry,” they wrote.
“On the flipside, Intel would need to navigate complex governance trade-offs, including juggling multiple JVs and stakeholders across the foundry business, Brookfield and Apollo as financial partners in specific fabs, and now TSMC as a strategic equity partner, to some degree raising the risk of overlapping priorities and conflicts of interest.”
Implications for the sector
For semiconductor equipment players like Applied Materials, Lam Research, and KLA, the implications are mixed but generally positive, the analysts believe.
TSMC’s influence may make Intel’s fabs more efficient, potentially reducing capex needs per fab. But if the JV boosts confidence and customer activity, Intel may increase spending overall. Notably, TSMC’s higher inspection standards could be a tailwind for KLA.
For AMD, the impact is slightly negative at the margin. A fully separated Intel Foundry business would open the door for Intel’s product division to tap TSMC capacity more freely, undercutting AMD’s current edge in process technology, UBS wrote.
The analysts maintained a ‘Neutral’ rating on Intel, with a 12-month price target of $23.
Shares of Intel traded down 10% at about $20 on Friday.