In context: As soon as the undisputed chief in semiconductor manufacturing, Intel now finds itself at a crucial juncture as its foundry operations face vital monetary challenges. It stays unsure whether or not a cope with TSMC can rescue Intel’s foundry enterprise, however with out it the corporate – higher identified in its heyday as “Chipzilla” – should discover a strategy to tackle 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 12 months. In Q2 2024 alone, the foundry posted an working lack of $2.83 billion, a pointy enhance from $1.87 billion the earlier 12 months. 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 a few potential partnership with TSMC. This concept gained traction following a report from Robert W. Baird analysts, citing “discussions from the Asia provide chain,” which instructed that TSMC may turn out to be a joint proprietor of Intel’s manufacturing enterprise after a possible spinoff. Whereas unconfirmed, the opportunity of 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 now not generate sufficient development to soak up the numerous prices for modern fabs, he stated in a analysis notice. Caso additional emphasizes that solely TSMC can drive the foundry quantity wanted to soak up Intel’s mounted prices in an expeditious method.
On the identical time, Intel’s monetary struggles have taken a toll on its market worth. The corporate’s inventory value plummeted 60% final 12 months, lately buying and selling close to a 10-year low. Even with a latest 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 line with FactSet estimates, analysts count on unfavourable free money circulation to persist by means of a minimum of the tip of subsequent 12 months.
Past monetary issues, Intel’s foundry operations additionally undergo from a technological lag. The corporate trails TSMC by roughly a 12 months in reaching aggressive yields for every new course of node. Moreover, Intel’s manufacturing prices are estimated to be 30% to 35% greater than TSMC’s attributable to 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 expertise to boost energy effectivity and efficiency.
