In context: As soon as the undisputed chief in semiconductor manufacturing, Intel now finds itself at a vital juncture as its foundry operations face vital monetary challenges. It stays unsure whether or not a take care of TSMC can rescue Intel’s foundry enterprise, however with out it the corporate – higher identified in its heyday as “Chipzilla” – should discover a technique to deal with its manufacturing challenges and monetary losses.
Intel’s foundry division reported a staggering lack of over $13 billion on $17.5 billion in income final yr. In Q2 2024 alone, the foundry posted an working lack of $2.83 billion, a pointy enhance from $1.87 billion the earlier yr. This stands in stark distinction to TSMC, the business chief, which generated $41.1 billion in working revenue on $90 billion in income throughout the identical interval. These figures spotlight the severity of Intel’s predicament.
As Intel grapples with its foundry woes, hypothesis has emerged about a possible partnership with TSMC. This concept gained traction following a report from Robert W. Baird analysts, citing “discussions from the Asia provide chain,” which advised that TSMC might develop into a joint proprietor of Intel’s manufacturing enterprise after a possible spinoff. Whereas unconfirmed, the potential for such a collaboration has drawn vital curiosity from business observers.
Chris Caso, an analyst at Wolfe Analysis, spells out the rationale behind this potential partnership: Intel’s core server and PC companies will not generate sufficient development to soak up the numerous prices for modern fabs, he stated in a analysis be aware. Caso additional emphasizes that solely TSMC can drive the foundry quantity wanted to soak up Intel’s fastened prices in an expeditious method.
On the similar time, Intel’s monetary struggles have taken a toll on its market worth. The corporate’s inventory value plummeted 60% final yr, just lately buying and selling close to a 10-year low. Even with a current 22% surge in share value, Intel’s market capitalization stays roughly one-eighth that of TSMC’s – a stark reversal from simply 5 years in the past when each corporations have been valued at parity.
Including to Intel’s woes is its substantial money burn. Over the previous three years, the corporate has spent practically $40 billion in an effort to meet up with TSMC’s manufacturing processes. In accordance with FactSet estimates, analysts anticipate destructive free money circulation to persist by way of not less than the top of subsequent yr.
Past monetary considerations, Intel’s foundry operations additionally undergo from a technological lag. The corporate trails TSMC by roughly a yr in reaching aggressive yields for every new course of node. Moreover, Intel’s manufacturing prices are estimated to be 30% to 35% larger than TSMC’s resulting from decrease wafer volumes.
Rather a lot hinges on Intel’s newest 18A manufacturing course of, which is anticipated to be a pivotal second for the corporate’s foundry ambitions. Intel has positioned 18A as a game-changer, boasting developments corresponding to RibbonFET transistors and PowerVia know-how to reinforce energy effectivity and efficiency.
