Did Taiwan Semiconductor Simply Say “Checkmate” to Intel?

Throughout President Biden’s tenure within the Oval Workplace, his administration made it some extent to spice up funding in home manufacturing. One of many administration’s accomplishments got here in 2022, when Biden signed the CHIPS and Science Act — a legislation that seeks to take a position $280 billion into analysis and growth and semiconductor manufacturing right here within the U.S.

Over the past couple of years, Intel emerged as one of many greatest beneficiaries of CHIPS Act funding. Given rising funding in synthetic intelligence (AI) infrastructure — significantly in information facilities and chipware — I beforehand predicted that Intel might be a big-time winner below the brand new Trump administration — which, like his predecessor, is concentrated on enhancing home manufacturing investments.

Nevertheless, a current announcement from Taiwan Semiconductor Manufacturing (NYSE: TSM) is making me rethink my cautious optimism round Intel.

Let’s discover Intel’s newest fumble and assess why Taiwan Semi’s newest announcement might be the last word checkmate transfer towards its American foundry rival.

Final yr, Intel generated $53.1 billion in complete income. Whereas this represented solely a 2% decline yr over yr, outcomes from the corporate’s foundry enterprise had been extra alarming.

In 2024, Intel Foundry generated $17.5 billion in gross sales — down 7% yr over yr. The foundry enterprise competes instantly with Taiwan Semi, which owns practically 60% of the worldwide foundry market. Provided that Intel Foundry is decelerating at a sooner charge in comparison with the corporate’s general enterprise, I am not too assured Intel is proving that it will possibly catch as much as its long-established rivals.

So as to add salt to the wound, Intel simply introduced that it’s now delaying opening a brand new plant in Ohio till 2030. For reference, the plant was alleged to be operational between this yr and 2026. Now, it is pushed off till subsequent decade.

Semiconductor chips manufactured in a fab facility. — Picture supply: Getty Photographs.

On March 4, Taiwan Semi introduced that it’s investing $100 billion into the U.S. to construct three extra fabrication crops, two packaging factories, and a analysis and growth (R&D) heart. This funding comes on the heels of an present $65 billion challenge in Arizona, the place TSMC is constructing extra manufacturing capabilities.

TSMC’s funding within the U.S. is supposed to assist the corporate strengthen operational relationships with main prospects together with Nvidia, AMD, Broadcom, and Qualcomm.

Over the past a number of weeks, a number of tech giants within the Magnificent Seven group have made public their respective plans to put money into AI infrastructure over the following a number of years. On the floor, you would possibly suppose that Intel may benefit from rising capital expenditures (capex) from AI’s greatest contributors. As a substitute, TSMC has taken notice of Intel’s struggles, and I see the corporate’s new $100 billion funding within the U.S. as a transfer that would additional strengthen its already-dominant pulse on the foundry market.

Regardless of its shut relationship with the U.S. authorities, Intel has proven little (if any) progress from its CHIPS Act grants. This implies I am hard-pressed to purchase right into a bull narrative round Intel at this level. Whereas there have been some rumblings of a possible partnership between Intel and TSMC, I am but to see any tangible particulars emerge. In my eyes, a productive alliance with Taiwan Semi or perhaps a potential acquisition of Intel might be the most effective consequence for the corporate proper now.

To me, Intel appears misplaced, and the corporate is falling behind its greatest rival throughout a very generational revolution underscored by AI. On the finish of the day, I believe TSMC’s investments within the U.S. would possibly simply be a checkmate transfer towards Intel.

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Adam Spatacco has positions in Nvidia. The Motley Idiot has positions in and recommends Superior Micro Units, Intel, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Idiot recommends Broadcom and recommends the next choices: quick Could 2025 $30 calls on Intel. The Motley Idiot has a disclosure coverage.

Did Taiwan Semiconductor Simply Say “Checkmate” to Intel? was initially revealed by The Motley Idiot