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Baird notes supply chain talk of Intel fab spinoff with TSMC involved

X

XYang2023

Well-known member
I wrote about this approach on this forum after the August earnings call. At that time, I thought this approach was the cheapest for both sides. Probably no one believed it, and most viewed TSMC with a winner-takes-all perspective.

"In addition, Intel’s fab could be spun off into a new entity jointly owned by TSMC and Intel, and run by TSMC, with the new entity receiving U.S. Chip Act funding, the firm adds."

Baird notes supply chain talk of Intel fab spinoff with TSMC involved - TipRanks.com

Baird analyst Tristan Gerra says there are discussions from the Asia semiconductor supply chain that the U.S. government will get involved in potentially TSMC (TSM)...
www.tipranks.com www.tipranks.com
 
If so, the cash infusion will help Intel deleverage, and sharing the client base will nullify the high CapEx argument.
 

Palmisano: Intel Needs to Revisit its Strategy

Maybe the BoD can let PG retire gracefully. The BoD can promote the CCG head, MJH to be the CEO. Given she already has a relationship with TSMC. She can start working a deal with TSMC to transition Intel to a design focus company. The relief from capital burden enables it to focus on...
semiwiki.com
 
The best plan is to spin off. TSMC and Intel JV is a perfect landing as long as TSMC runs the fabs.

This would be a complicated finance transaction given the IFS financial issues. Intel has a Board member who knows how to pull this off.
 
It should be based on the asset value at a minimum, i.e., ideally the amount of time-valued money TSMC would need to construct the fabs on its own. Then, it would be jointly owned. Intel's book value is around $100 billion or maybe more. TSMC would compensate Intel at least $50 billion, which would be sufficient for Intel to pay off its debt. This would allow Intel to focus on its design business without selling off Altera and Mobileye.
 
Given all the issues TSMC had with the AZ fab start up and their public statements of how hard it is to get things done in the U.S. Why would they want to saddle themselves with additional U.S. fabs? They have sent a significant number of workers to AZ for the start up of 1 fab. Where do they come up with enough employees to bring the OR, AZ and NM fabs up to speed doing things the TSMC way? And then there is the whole issue of changing the Intel culture that has been baked into all of the employees they would acquire. The results would almost certainly be a huge loss of headcount resulting in an even greater need to strip employees from their Taiwan fabs. Unlike Intel, TSMC does not seem to have the bloated employee pool that would be needed to supply all the needed talent. I see this as a non-starter from the TSMC perspective.
 
Artificer60 said:
Given all the issues TSMC had with the AZ fab start up and their public statements of how hard it is to get things done in the U.S. Why would they want to saddle themselves with additional U.S. fabs? They have sent a significant number of workers to AZ for the start up of 1 fab. Where do they come up with enough employees to bring the OR, AZ and NM fabs up to speed doing things the TSMC way? And then there is the whole issue of changing the Intel culture that has been baked into all of the employees they would acquire. The results would almost certainly be a huge loss of headcount resulting in an even greater need to strip employees from their Taiwan fabs. Unlike Intel, TSMC does not seem to have the bloated employee pool that would be needed to supply all the needed talent. I see this as a non-starter from the TSMC perspective.
Click to expand...
To avoid tariffs. They have to integrate Intel employees into the operations and that should be part of the deal.
 
MKWVentures said:
The best plan is to spin off. TSMC and Intel JV is a perfect landing as long as TSMC runs the fabs.

This would be a complicated finance transaction given the IFS financial issues. Intel has a Board member who knows how to pull this off.
Click to expand...

It will be cheaper and more efficient to let TSMC to buy Intel Foundry when IFS becomes an independent company, instead of forming a complicated joint venture with Intel.

Or, TSMC can buy IFS in the bankruptcy court. It will give the IFS division a clean restart.

Why on the earth TSMC needs to take care the IFS, the hot potato, when Intel itself can't and doesn't want to deal with it?

In terms of tariffs, Americans will pay it, not TSMC. Why people assume TSMC will worry about it so much to the degree to spend $50 or $100 billion to buy Intel Foundry? The Intel Foundry purchase by TSMC will offload Intel's financial troubles to TSMC. It's really a dream for those who believed Intel then trapped by Intel.
 
hist78 said:
It will be cheaper and more efficient to let TSMC to buy Intel Foundry when IFS becomes an independent company, instead of forming a complicated joint venture with Intel.

Or, TSMC can buy IFS in the bankruptcy court. It will give the IFS division a clean restart.

Why on the earth TSMC needs to take care the IFS, the hot potato, when Intel itself can't and doesn't want to deal with it?

In terms of tariffs, Americans will pay it, not TSMC. Why people assume TSMC will worry about it so much to the degree to spend $50 or $100 billion to buy Intel Foundry? The Intel Foundry purchase by TSMC will offload Intel's financial troubles to TSMC. It's really a dream for those who believed Intel then trapped by Intel.
Click to expand...
No, you are ignoring the geo-risk aspect. $50 billion is a fair value to ask, as the Arizona fabs alone cost TSMC upwards of $50 billion.

On the other hand, maybe Intel believes it is a bad deal and thinks it can maximize value further. If IFS is profitable, its valuation should be 1-2 times the book value. TSMC can manage the geo-risk themselves, but at higher costs.
 
Or is the new administration just going to use tariffs and other pressure to:
"... encourage chip designers to partner with Intel Foundry. We wouldn't be surprised if the Trump Administration leans more aggressively on potential foundry customers than the prior Administration did."

Stock of the Day: Intel sees 2-day spike of 12% after Vance's US chipmaking pledge​

Matthew Fox
Feb 12, 2025, 7:44 AM PT

Stock of the Day: Intel sees 2-day spike of 12% after Vance's US chipmaking pledge

JPMorgan called Intel the "poster child" of US chip manufacturing and said that 2025 will be a "moment of truth" for the company's plans.
markets.businessinsider.com
 
Also on this forum, many people believed tariffs on Taiwan would not happen. I mentioned it was necessary to encourage fabless companies to source locally before Trump got elected. No one took that scenario seriously at that time.
 
XYang2023 said:
No, you are ignoring the geo-risk aspect. $50 billion is a fair value to ask, as the Arizona fabs alone cost TSMC upwards of $50 billion.

On the other hand, maybe Intel believes it is a bad deal and thinks it can maximize value further. If IFS is profitable, its valuation should be 1-2 times the book value. TSMC can manage the geo-risk themselves, but at higher costs.
Click to expand...

So now you think that Intel Foundry is hopeless to be kept in-house?

Do you understand a TSMC fab is very different from a Intel fab. Even if TSMC needs more capacity in US, why can't TSMC build it by itself instead of salvaging the money losing IFS?

I think Intel shareholders should not hope TSMC will come to bail them out. Finding a good CEO and a good business strategy are much more feasible and practical for the Intel.
 
XYang2023 said:
It should be based on the asset value at a minimum, i.e., ideally the amount of time-valued money TSMC would need to construct the fabs on its own. Then, it would be jointly owned. Intel's book value is around $100 billion or maybe more. TSMC would compensate Intel at least $50 billion, which would be sufficient for Intel to pay off its debt. This would allow Intel to focus on its design business without selling off Altera and Mobileye.
Click to expand...
It should be based on what TSMC shareholders think it's worth - if indeed they decide it's worth doing. Of course, there's some political mess in anything like this. But certainly not for any of us to decide.

I thought Intel wanted to sell off at least part of Altera. And has sold part of Mobileye. Thought that was the corporate strategy (insofar as we can know now).
 
siliconbruh999 said:
My point still remains competition is necessary if Intel and TSMC Joins hand we would have our products price increase and no competition cause you have the most risk taking company and the most risk averse company joining hands sounds weird and now so close at 18A
.
Click to expand...
It feels that this deal rumor was b.s.

I can imagine a tariff by Trump adminstration in some way like this: 1) 25% or even 50% tariff on chips manufactured in TW. 2) however, if the involved fab customer also manufactures in the U.S., or put some sort of prepay into a fab based in the U.S. (it could be IFS, globalfoundries, or TSMC), they can get a deduction of tariffs. It is kind of like carbon taxes and ev credits.
 
kevin01 said:
It feels that this deal rumor was b.s.

I can imagine a tariff by Trump adminstration in some way like this: 1) 25% or even 50% tariff on chips manufactured in TW. 2) however, if the involved fab customer also manufactures in the U.S., or put some sort of prepay into a fab based in the U.S. (it could be IFS, globalfoundries, or TSMC), they can get a deduction of tariffs. It is kind of like carbon taxes and ev credits.
Click to expand...
The above scheme can be somewhat "played" by TSMC and its customers. But I can think of a lot of ways that benefit Intel and Micron: 1) create R&D credit, which rewards U.S. based R&D, not just manufacturing. 2) these credits are sellable, exactly like EV credits.
 
hist78 said:
So now you think that Intel Foundry is hopeless to be kept in-house?

Do you understand a TSMC fab is very different from a Intel fab. Even if TSMC needs more capacity in US, why can't TSMC build it by itself instead of salvaging the money losing IFS?

I think Intel shareholders should not hope TSMC will come to bail them out. Finding a good CEO and a good business strategy are much more feasible and practical for the Intel.
Click to expand...
I second this opinion their economy of scale are different and and Intel should fix both products and foundry.
 
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