Broadcom and TSMC Eye Potential Intel Deals Amidst Industry Shake-up

The semiconductor industry is bracing for a potential shake-up as rumors suggest that Intel's rivals, Taiwan Semiconductor Manufacturing Co (TSMC) and Broadcom, are each eyeing potential deals that would break the U.S. chipmaking icon in two. According to a report by The Wall Street Journal, both companies are considering moves that could split Intel into two separate entities, with TSMC potentially taking a controlling stake in Intel's manufacturing operations.

Intel, once the undisputed leader in semiconductor manufacturing, has faced challenges in recent years, losing ground to rivals like Nvidia and Broadcom. Its stock plunged 60% last year as it fell behind in AI chip advancements, and the latest earnings report marked a third straight quarter of declining revenue. The company is also undergoing leadership changes following the departure of CEO Pat Gelsinger in December.



The potential deals come as the U.S. government is considering forcing Intel into a joint venture with TSMC to bolster domestic chip manufacturing. According to Baird analyst Tristan Gerra, supply chain sources indicate that the U.S. government is considering pushing a joint venture between Intel and TSMC, with TSMC deploying engineers to Intel's advanced 3nm and 2nm fabrication plants. The fab unit could be spun off into a new entity co-owned by Intel and TSMC, with the latter overseeing operations. The new company could also qualify for funding under the U.S. CHIPS Act, aimed at revitalizing the U.S. semiconductor industry.



If implemented, these deals could have significant implications for the semiconductor industry. Intel would benefit from significant cash flow relief, allowing it to focus on design and platform solutions. A viable fab could also attract major chip designers seeking a stable and geographically secure manufacturing alternative, ensuring the utilization of the fab. TSMC, on the other hand, would gain access to advanced manufacturing technologies and potentially increase its market share in the foundry market.

However, these deals also face regulatory and geopolitical challenges. The U.S. government may have national security concerns about foreign ownership of critical infrastructure, and antitrust regulations could also come into play if the transactions lead to a significant reduction in competition. Geopolitical tensions, such as those between the U.S. and China, could also impact the likelihood of a successful transaction.

In conclusion, the potential deals between Intel and Broadcom or TSMC could significantly reshape the semiconductor industry. While these moves could provide Intel with much-needed relief and TSMC with access to advanced manufacturing technologies, they also face regulatory and geopolitical hurdles. Investors should closely monitor the situation and consider the specific implications for each company and the broader semiconductor market.