Intel, TSMC Strike Preliminary Deal On Foundry Venture

Intel and Taiwan Semiconductor Manufacturing Co (TSMC) have reached a preliminary agreement to form a joint venture to run Intel’s fabrication plants, The Information reported, citing unnamed people familiar with the discussions.

The deal, if concluded would see TSMC take a 20 percent stake in the new company, the report said.

Intel and other US chipmakers would reportedly hold the majority of the venture’s stock, with TSMC holding a minority share.

Joint venture

In March a Reuters report said TSMC had put forward Nvidia, AMD and Broadcom to take stakes in a joint venture to run Intel’s factories.

US executive branch and Commerce Department officials have been pushing for a deal between Intel and TSMC to resolve Intel’s long-running financial crisis, which has forced it to cut jobs and scale back worldwide expansion plans.

As part of the negotiations, TSMC has discussed sharing some of its manufacturing techniques with Intel in exchange for the 20 percent stake, The Information’s report said.

But some Intel executives are concerned the deal could lead to layoffs and sideline Intel’s existing technology, according to the report.

Intel has the largest and most advanced chip production infrastructure operated by a US-based company, at a time when the US has been spending billions to build up domestic chip manufacturing.

But it has been spending heavily on a plan to open up its fabs to external clients, in what is known as contract manufacturing, a field dominated by TSMC in which Intel has no experience.

The contract foundry business has yet to bring in major clients that would justify the expenditure, leading to turmoil at the company, with former chief executive Pat Gelsinger leaving Intel in December.

Financial crunch

New chief executive Lip-Bu Tan, who took over in March, is considering sharp cuts to the company’s middle-management and changes to its manufacturing processes to improve usability and performance, according to a Reuters report.

An investment by TSMC and other chipmakers could give Intel a financial lifeline to continue its turnaround efforts.

TSMC has been expanding its investments in the US, last month promising to spend an additional $100 billion (£77.5bn) on plants in the country.

Intel’s last year reported a net loss of $18.8bn, its first since 1986, while the company’s shares lost about 60 percent of their value.

The company’s shares had risen about 12 percent since the beginning of the year, but fell late last week on fears of the repercussions of planned US tariffs, and closed the week roughly flat with the beginning of January.