Trying to force a partnership between Taiwan Semiconductor Manufacturing Company (TSMC) and Intel Corp would be a wildly complex ordeal. Already, the reported request of the Trump administration for TSMC to take a controlling stake in Intel’s US factories is facing valid questions about feasibility from all sides.
Washington likely won’t support a foreign company operating Intel’s domestic factories. Just look at how that’s going over in the steel sector.
Meanwhile, many in Taiwan are concerned about TSMC being forced to transfer its bleeding-edge tech capabilities and give up its strategic advantage. This is significant because this dominance not only keeps it ahead of industry rivals, but is also seen by many as the ‘holy mountain’ that secures this self-governing island from Chinese aggression.
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On a more practical level, the two chip-makers are vastly different in everything from corporate cultures to manufacturing operations. TSMC revolutionized the industry with its pure-play foundry approach, Intel has historically produced chips it helped design. It would be a time-consuming and expensive headache for TSMC to take over Intel’s factories in the US or integrate them with its own.
It’s not clear that this proposed tie-up will be enough to restore Intel’s glory. The California-based company has already been showered with favour from the US government via policies aimed at strategically onshoring semiconductor making. But it has still been plagued with struggles.
As interim co-CEO Michelle Johnston Holthaus said on the most recent earnings call: “There are no quick fixes.” The company failed to effectively jump on the AI boom and has been falling further behind rivals technologically, ending last year with its lowest revenue in more than a decade.
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All this stands in contrast with TSMC’s strong performance. Remarkably, the two were roughly equal in value about five years ago, but the Taiwanese firm’s market cap now is some nine times that of its rival. TSMC once seemed acutely aware of how difficult it would be to turn Intel’s fortunes around. Back in October 2024, when CEO C.C. Wei was asked if the company was interesting in acquiring Intel’s factories, Wei responded: “No, not at all.”
Although TSMC’s change of heart appears to be the result of a request from US President Donald Trump’s team, it’s not going to change the mounting challenges that Intel is facing.
It’s worth remembering how we got here. Reports of a joint venture emerged after Trump campaigned on the proposal of introducing tariffs against Taiwan’s chip industry to bring semiconductor manufacturing back to the US.
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But Taiwan didn’t ‘steal’ the industry, it got ahead by pioneering the made-to-order chip-making business model that Silicon Valley had overlooked. This background is significant, because Trump has shown a habit of threatening tariffs as a negotiating tactic. In this case, his goal is restoring domestic chip production.
Tariffs, however, won’t get that job done. TSMC would likely be able pass those costs onto customers, and its two biggest are firms at the heart of America’s tech ambitions: Nvidia and Apple. The tech leaders that Trump has sought to maintain close ties with wouldn’t be happy to pay more for cutting-edge chips.
As influential technology analyst Ming-Chi Kuo has pointed out, TSMC’s yearly chip exports to the US are worth less than its monthly revenue. Still, TSMC “cannot simply ‘accept tariffs’ and ignore Trump’s statements,” Kuo says. But knowing what the president ultimately wants can give TSMC some room to get ahead on its own.
The proposal of TSMC running Intel’s factories is still at very early stages. It’s not even clear that Intel is open to the deal, which could involve other US chip design companies to counter concerns of foreign ownership.
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TSMC’s representatives and the Trump team should find some middle ground that does not involve a complicated and costly tie-up with Intel. TSMC could start by offering more investment in its existing US chip-making efforts in Arizona. This would help meet Trump’s aim of winning back production, while still allowing TSMC to keep its tech mastery in-house.
As I’ve written before, when it comes to countering Beijing, TSMC and the US tech industry are on the same side.
The Taiwanese company’s chip-making prowess is the best in the world, which explains why so many firms riding the AI wave are dependent on it. This makes the threat of tariffs seem like an empty or self-defeating move and provides the firm with significant leverage. But there is always the danger that TSMC could lose that edge with a costly entanglement that threatens to dilute its dominance. ©Bloomberg
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