The U.S. government is reportedly promoting a plan for Intel and TSMC to form a joint venture. Semiconductor industry experts warn that this is the worst option for TSMC, even more unfavorable than imposing tariffs. TSMC may face the risk of technology leakage, which could jeopardize its leading advantage in advanced processes.
(Background: OpenAI’s first self-developed AI chip is expected to complete design and trial production at TSMC this year, potentially counterbalancing NVIDIA’s dominance?)
(Background Supplement: Morgan Stanley: The tariff war could cause a 20% plunge in tech stocks like TSMC, advising to take profits first.)
According to a report from financial services provider Baird, the U.S. government may be pushing for a plan that would form a joint venture between Intel and TSMC. The report indicates that TSMC will send engineers to Intel’s 3nm / 2nm wafer fabrication plant to provide expertise, ensuring that the plant and Intel’s subsequent production plans can be implemented.
At the same time, the report notes that this plant “could be split into a new entity owned jointly by TSMC and Intel, with TSMC responsible for its operations.” This entity would be eligible for funding under the U.S. CHIPS Act.
U.S. government promoting TSMC and Intel joint venture?
Baird analyst Tristan Gerra stated that although the news has not yet been confirmed and the related plan will take a long time to complete, the rumor is plausible and could further solidify the core competitiveness and manufacturing strength that Intel’s former CEO focused on.
Tristan Gerra believes that this move would not only improve Intel’s cash flow but also allow it to focus on design and platform solutions in the future. Additionally, a successful wafer fabrication plant could ultimately attract important companies without their own fabs, diversifying operations and entering a reliable geographic production model.
Despite the rumor not being confirmed, TSMC’s stock price dropped over 1.8% or 20 TWD today, hitting a low of 1080 TWD, ultimately closing down 0.91% or 10 TWD at 1090 TWD, while Intel’s stock price rose against the trend by 7.2%, closing at $22.48.
Risk of Technology Leakage for TSMC, More Unfavorable than Tariffs
The release of this news has caused a shock in the market. According to reports from the Central News Agency, semiconductor industry experts candidly stated that this is the worst option for TSMC, even more disadvantageous than imposing tariffs, as TSMC would face the risk of technology leakage.
Liu Peizhen, Director of Economic Research at the Taiwan Institute of Economic Research, analyzed that Intel is currently facing operational difficulties and bottlenecks in technological development. Overall, TSMC holds a leading position in global semiconductor manufacturing. If TSMC were to form a joint venture with Intel, it could help Intel overcome its challenges and support the development of the U.S. semiconductor manufacturing industry.
However, Liu Peizhen admitted that a joint venture with Intel would actually be disadvantageous for TSMC. TSMC Chairman and CEO Wei Zhejia previously stated that he does not consider acquiring Intel’s fabs, unwilling to take on Intel’s mess. If TSMC were to form a joint venture with a competitive Intel, it may face the risk of technology leakage.
Although TSMC employs a joint venture model at its factories in Kumamoto, Japan, and Dresden, Germany, Liu Peizhen pointed out that both plants are joint ventures with customer partners and utilize mature process technologies. In contrast, a joint venture with Intel would inevitably focus on advanced process technologies, and once technology leaks, it could threaten TSMC’s leading advantage in advanced processes. Particularly under President Trump’s priority of U.S. interests, TSMC may find itself at a disadvantage if it collaborates with Intel.
Liu Peizhen stated that TSMC holds an irreplaceable position in advanced process technologies and possesses strong bargaining power. If the U.S. imposes tariffs on chips, TSMC should be able to smoothly pass on costs to customers. Therefore, a joint venture with Intel is the worst option for TSMC, even more unfavorable than imposing tariffs.
