Why TSMC is planning to take over Intel's US factories
What's the story
Taiwan Semiconductor Manufacturing Company (TSMC) is considering buying a controlling stake in Intel's US-based factories, as per Bloomberg.
The move comes after the Donald Trump administration showed interest in strengthening American manufacturing and keeping the US at the forefront of critical technologies.
TSMC and Trump administration's talks are still in the early stages, with no clear word on Intel's side of the potential deal.
Deal details
A potential partnership to operate Intel's US factories
The proposed deal would have TSMC, the world's largest contract chipmaker, fully operate Intel's US semiconductor factories.
This could also quell concerns about Intel's financial health, which has prompted job cuts and a halt in its global expansion plans.
The structure of this potential partnership is yet to be defined but could see major American chip designers taking equity stakes with support from the US government.
Industry impact
TSMC's role in the global semiconductor industry
TSMC is the leading chipmaker for tech giants such as Apple, NVIDIA, and other semiconductor developers for AI algorithms.
However, despite its importance, this potential partnership may be politically challenged, just like Nippon Steel's proposed acquisition of US Steel.
A White House official said Trump is unlikely to support a foreign entity operating Intel's factories, adding another layer of complexity to the discussions.
Market challenges
Intel's financial struggles
Despite losing ground to competitors over the last five years, Intel still makes the most widely used components in the personal computer and server industries.
It owns the largest and most advanced production network of any US-based company.
These factories have become strategically important as Washington seeks to reverse decades of semiconductor manufacturing shifting to Asia.
However, Intel's financial struggles have led to job cuts and a halt in its global expansion plans.
Funding woes
Intel's funding and market share challenges
Under former CEO Pat Gelsinger, Intel launched an ambitious plan to reclaim its chipmaking lead, securing $7.9 billion in US government funding for projects in four states.
It also got $3 billion to manufacture chips for the US military.
However, these efforts haven't drawn enough outside customers to justify the investments, particularly at a new site in Ohio.
Intel's own products are also losing market share, further straining its finances.