Trump administration could pursue changes to the Biden-era CHIPS and Science Act
Intel Corp.’s stock continues to rise as the Trump administration makes U.S. chip manufacturing an important part of its agenda.
A rumored joint venture between Intel Corp. and its biggest rival, Taiwan Semiconductor Manufacturing Co., could pose more potential problems than it’s worth, and the U.S. chip giant could actually fare fine without it, Bernstein Research concluded.
Shares of Intel rocketed 23.6% over the past five trading days, marking the stock's best weekly performance since mid-January 2000.
Bernstein’s Stacy Rasgon attributed most of the stock’s rise this week to a report in Asia of some sort of joint venture with TSMC “to help prop [Intel] up” and to the Trump administration’s efforts to bolster a “Made in America” semiconductor agenda, after Vice President J.D. Vance’s comments in Paris this week.
But a joint venture with TSMC, now the worldwide chip-manufacturing leader, is not necessarily a great idea — and Rasgon pointed to some qualms.
Digitimes in Asia reported on ways a joint venture between the two chip giants could be formed, and Rasgon summed them up: (1.) having TSMC build a U.S. packaging plant, (2.) a JV in which TSMC would invest in Intel’s manufacturing operations and (3.) TSMC allowing Intel to handle its packaging orders from TSMC’s U.S. customers. Packaging technology refers to the protective casing of chips.
Rasgon voiced problems with all the options reportedly under discussion, stating in a note that Intel’s forming a joint venture with TSMC, which would also include a technology transfer from TSMC to Intel, does not make sense.
“We don’t know why TSMC would want to license their process tech and IP (voluntarily at least) to a potential leading edge competitor, unless the terms are very favorable,” Rasgon said in the client note, going on to wonder how much would Intel have to pay. “And frankly, if 18A and the overall process roadmap are as healthy as Intel claims, why do they even need to think about standardizing on TSMC’s process offerings?”
Intel’s 18A is its next-generation manufacturing process, which has been in the works since former Chief Executive Pat Gelsinger joined the company in early 2021. It is now in the process of starting up volume production, and a recent paper from the research firm TechInsights indicated that Intel’s process has better performance than TSMC’s next-generation process.
But Rasgon also pointed to Intel as becoming something of a pawn in the political machinations of the Trump White House. “We do not know what, if anything, the Trump administration might be considering offering (or threatening) in return for TSMC’s largesse (a carrot/stick, or a blatant stick-up?)” he wrote.
Taiwan has been a strong ally of the U.S., and any such machinations could have broader impacts. “But blatantly forcing them to ‘give up’ their semiconductor champion might have unintended consequences, not to mention that the U.S.’s reputation as a trustworthy ally is, naturally, also at stake,” Rasgon added.
He recommended that the better solution is to pursue the “Made in America” strategy by encouraging TSMC to pursue more manufacturing in the U.S., “which would also carry much less risk than trying [to] rescue Intel from their situation,” he wrote. He maintained a market-perform rating on Intel with a price target of $25. Bernstein rates TSMC outperform.
As part of the U.S. CHIPS and Science Act of 2022, signed that August by Democratic President Joe Biden, TSMC has received funding to build new manufacturing plants in Arizona, one of which has been completed. It is not clear yet what Trump’s plans are yet, with relation to the CHIPS Act, but Reuters reported on Thursday that the new administration is mulling changes to some conditions of some projects, and discard others.
“Projects in Texas and Arizona are likely OK for the most part. Ohio being a swing state likely would make it safer from getting whacked,” Maire wrote. “Micron [Technology Inc.] in Idaho is likely OK but [the] Schumer-sponsored Micron New York [plant] will likely get more scrutiny.”
All companies doing business in China would be under extra scrutiny.
Robert Maire, president of the consulting firm Semiconductor Advisors, said in a note to clients late Thursday that he believed some projects would be cut along political party lines, a view he espoused last year.
“Trump is famous for renegotiating deals, stiffing contractors, reneging on deals,” Maire wrote. “We are sure Trump will want to improve on every Chips Act deal and will likely withhold funding to extract better terms.”
So far, though, investors are viewing Trump’s advocacy of building a bigger U.S. semiconductor industry in a mostly positive light.
