Intel, TSMC Tentatively Agree On Chipmaking JV In 'America First' Era 

Intel shares are up 5% late in the cash session following a report from The Information that sheds light on ongoing talks between Intel and Taiwan Semiconductor Manufacturing Co. (TSMC) to form a joint venture to operate Intel's chipmaking facilities. Under the proposed deal, TSMC would take a 20% stake in the new company and offer manufacturing expertise and personnel training. 

Two people familiar with the talks between Intel and TSMC provided additional color about the preliminary agreement to form the new joint venture:

Intel and other U.S. semiconductor companies will hold the majority of the shares in the proposed JV, which would include at least some of Intel's existing chip foundries, said the two people. In exchange for the 20% stake, TSMC has discussed sharing some of its chipmaking methods with Intel and training Intel personnel to use them, insteading of funding its stake with capital, one of the people said.

It isn't clear how the rest of the new entity would be funded. The deliberations are ongoing and no final agreement has been reached, the two people said. There's still resistance from some Intel executives concerned that the deal would cause widespread layoffs at the company while subsuming its own chipmaking technology, according to two Intel employees.

The JV was encouraged by members of the Trump administration and is part of the broader 'America First' effort to revive the U.S. chipmaking sector after decades of decay. It also plays into hemispheric defense, where the U.S. will rely less on foreign adversaries for chips.

President Trump has previously accused Taiwan of "stealing" America's chip industry: "You know, Taiwan, they stole our chip business ... and they want protection." However, TSMC has reversed the tide with additional investments in the U.S. - more than $100 billion.

Multiple reports over the last several weeks, including this one from Reuters, have discussed TSMC pitching a JV with Nvidia, Advanced Micro Devices, and Broadcom to operate Intel's factories.

Sources via The Information continued:

White House and Commerce officials have been pressing TSMC and Intel to strike a deal to resolve the long-running crisis at Intel, one of the most iconic U.S. technology firms. Commerce officials who have facilitated the negotiations support the tentative deal, said the two people who have been involved in some of the talks.

. . . 

The proposed joint venture could also help TSMC effectively put down a major, if struggling, competitor and give the Taiwanese government more bargaining power with the Trump administration, which just levied tariffs on goods other than chips from the island.

In February, Robert W. Baird analysts wrote in a note to clients that the Trump administration was working to broker a JV between Intel and TSMC, one which would focus on something we said last August has excess value at the Intel enterprise, namely its fabs... 

In markets, Intel shares are up 5% in late cash trading. On the year, shares are up about 16% on speculation of a deal - shares have been floored around $20 handle. 

Will Intel shares fly in Trump's America First era?