New CEO May Block Intel Split, TSMC's Plan for JV to Run Fabs

TSMC has proposed a joint venture with top US chip designers – Nvidia, Advanced Micro Devices and Broadcom – to operate Intel’s chip foundries, sources have revealed.

The Taiwanese company has proposed that the JV could run Intel’s factories, according to a report by Reuters, which cited four sources. They said the proposal came after US President Donald Trump asked TSMC to help turn around the troubled US company because it is an industrial icon.

But any chance of the proposal succeeding – which some rate as a major challenge because of Intel’s vastly different production processes – will likely be decided by Intel’s new CEO, industry veteran Lip-Bu Tan, whose appointment was announced on Wednesday. He has suggested the design and manufacturing arms of the company should not be split up.

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Intel shares jump 10%

The selection of Lip-Bu Tan was lauded by Wall Street analysts on Thursday, who said it brought “instant credibility” that should help restore investor confidence and support Intel’s efforts to become a major contract chipmaker.

The stock jumped 10% in pre-market trading the day after his appointment was announced.

“Tan in as CEO at Intel was as good as stakeholders could have hoped for,” said TD Cowen analysts, noting that he has “deep relationships” across the chip ecosystem that could draw customers to the company’s contract manufacturing business. (See more on Tan below)

Meanwhile, under TSMC’s proposal, the Taiwanese chipmaking giant would run operations at Intel’s foundry division, which makes chips adapted for the needs of customers, but it would not own more than 50%, the sources said. Qualcomm has also been approached by TSMC, according to one of the sources and a separate source.

Talks on the idea are at an early stage, the report said, and sources spoke on condition of anonymity because the matter has not been revealed to the public yet.

Details of the plan for TSMC to take no more than a 50% stake and its overtures to potential partners are being reported for the first time. But any final deal – the value of which is unclear – would need approval from the Trump administration, which does not want Intel or its foundry division to be fully foreign-owned, the sources said.

Intel, TSMC, Nvidia, AMD and Qualcomm declined to comment. The White House and Broadcom did not respond to requests for comment, Reuters said.

At stake is the future of the US chipmaking giant, whose shares have lost more than half of their value in the last year.

Intel reported a 2024 net loss of $18.8 billion, its first since 1986, driven by large impairments. The foundry division’s property and plant equipment had a book value of $108 billion as of December 31, according to a company filing.

Intel is an iconic US brand (Reuters).

‘Trump keen to revive Intel’

Trump is keen to revive Intel’s fortunes, as he seeks to boost American advanced manufacturing, three of the sources said.

The sources said TSMC’s joint venture pitch was made to potential backers before the Taiwanese chipmaker announced with Trump on March 3 that the company planned to make a fresh $100 billion investment in the United States that involves building five additional chip facilities there in coming years.

Talks about the joint venture over Intel’s foundry division have continued, the three sources said, with TSMC looking to have more than one chip designer as a partner.

Multiple companies have expressed interest in buying parts of Intel, but two of the four sources said the US company has rejected discussions about selling its chip design house separately from the foundry division.

Qualcomm has exited earlier discussions to buy all or part of Intel, according to those people and a separate source.

TSMC plan faces major challenges

Intel board members have backed a deal and held negotiations with TSMC, while some executives are firmly opposed, according to two sources.

Intel’s contract manufacturing business, or foundry division, was a crucial part of former CEO Pat Gelsinger’s effort to save Intel. Gelsinger was forced out by the board in December, which named two interim co-CEOs who have mothballed its forthcoming AI chip.

Any deals between historical rivals TSMC and Intel would face major challenges and be costly and laborious. The two companies currently use vastly different processes, chemicals, and chipmaking tool setups at their factories, according to separate sources at the companies.

Intel has previously had manufacturing partnerships with Taiwan’s UMC and Israel’s Tower Semiconductor that could offer a precedent for the two companies to operate together, but it remains unclear how such a partnership would work regarding trade manufacturing secrets.

The Taiwanese chipmaker wants potential investors in the joint venture to also be Intel advanced manufacturing customers, according to one of the sources.

Reuters reported last week, citing sources, that Nvidia and Broadcom are running manufacturing tests with Intel, using the company’s most advanced production techniques, known as 18A. AMD is also evaluating whether Intel’s 18A manufacturing process is suitable for it.

But 18A has been an area of contention in negotiations between Intel and TSMC, two sources said. During talks in February, Intel executives told TSMC that its advanced 18A manufacturing technology was superior to TSMC’s 2-nanometre process, according to those sources.

Lip-Bu Tan set to take the reins

Lip-Bu Tan is a former board member who was seen as a contender to replace the ousted Pat Gelsinger, as its new CEO.

The Malaysian-born Tan, 65, is a respected chip industry veteran who has a formidable educational and professional record. He stepped down from the board last year over disagreements on how to turn the company around.

But yesterday, Tan wrote a letter to Intel employees signalling that he would not split up the company’s design and manufacturing businesses.

“Intel plays an essential role in the technology ecosystem, both in the US and around the world. And, together, I’m confident we can turn our business around,” he said.

Tan studied physics at Nanyang Technological University in Singapore, before gaining a master’s degree in nuclear engineering from MIT, and an MBA from the University of San Francisco.

A long-time tech investor, he has had different roles at several companies. He founded Walden International, a San Francisco-based venture capital firm, in the mid-80s, which poured money into many startups that became successful, such as Annapurna Labs and Nuvia.

Between 2009 and 2021 he helmed Intel supplier and chip-design maker Cadence Design Systems and was on the boards of Hewlett Packard Enterprise and SoftBank Group. In 2022, he was appointed to Intel’s board as part of a plan to restore the company’s place as the leading global chipmaker.

Reuters said while he faces a major challenge to turn Intel’s operations around, “his advantage is that virtually every one of Intel’s former and potential customers knows him and has done business with him, either buying one of the many startups he backed or using software from a company he ran.”

He knows AMD’s Lisa Su and Nvidia’s Jensen Huang, and “can leverage his experience and especially his industry connections, while also pursuing excellence within Intel,” independent analyst Jack Gold said.

During Tan’s time at Cadence, the firm’s stock appreciated 3,200% and it landed Apple as one of its largest customers as the iPhone maker shifted away from suppliers such as Intel and toward its own chips. Cadence’s tools also became central to chip industry firms such as Broadcom, which helps Google, Amazon and others design their own AI chips and have them made by TSMC.

“He did a really good job of pointing (Cadence) in the right direction,” said Karl Freund, analyst with Cambrian AI Research. “Cadence really aligned themselves with TSMC – they saw them as a leader and the go-to shop.”

Tan is due to take the reins on March 18.