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Intel’s plan to return to semiconductor leadership has been well received by investors. But Taiwan’s chip champion TSMC still seems well-positioned to meet the challenge.
Intel CEO Pat Gelsinger surprised the market this week by saying the company would go into the foundry business, making chips for others. Intel has long been known as a manufacturer of embedded devices, designing and manufacturing chips in-house. Gelsinger’s IDM 2.0 vision comes as Asian rivals such as TSMC and South Korea’s Samsung Electronics advance cutting-edge chip manufacturing technology.
TSMC shares have fallen about 3% since Intel’s announcement. But the short-term impact on TSMC is unlikely: Chip shortages mean it has more business than it can handle. And for now, Intel will still need to outsource the manufacturing of its most advanced chips to companies like TSMC.
Intel will spend a lot to catch up, building two plants in Arizona for $ 20 billion while increasing capex this year by more than 30% to between $ 19 and $ 20 billion. Demand for advanced chips is expected to spread the costs and justify the cash outlays, but Intel’s earlier attempt to get into the foundry business, in 2013-14, went nowhere.
And TSMC is not standing still. The company has raised this year’s capex guidance by more than 40% to between $ 25 and $ 28 billion. Even if Intel’s plan works as expected, its technology is likely still lagging behind TSMC’s. TSMC has been serving a diverse customer base for years, from Apple to Nvidia, and enjoys a better cost structure. It is also freed from the inherent conflict of interest that Intel bears, as a company that also designs and sells its own chips. Intel says it will keep the foundry independent, but customers like AMD and Apple are likely to hesitate to order it.
