Taiwan Semiconductor Mfg. Co. Ltd., (NYSE: TSM), stands to lose a lot as the Trump administration follows through on its promise to onshore manufacturing of the most advanced AI chips in the world.
Patrick Moorhead, chief executive of Moor Insights, says that the Taiwanese giant could opt for a partnership with the US-based Intel Corp (NASDAQ : INTC) as a way to work around the problem.
Moorhead acknowledged that a full-scale acquisition of INTC was unlikely due to national safety concerns. In an interview with CNBC on Friday, he said that a joint venture was possible as a way to finance the deal and possibly share IP.
Why would TSMC even consider a joint venture?
Intel’s stock has risen by more than 20% since JDVance reiterated that the new government is committed to ensuring that the most advanced chips are manufactured in the US.
Moorhead believes that TSMC will be the “biggest losers” in the event of a regime change. It is currently the leader in advanced AI chips, but they are made primarily in Taiwan.
Intel’s 18A process, which is the latest version of its 18-year-old process, is extremely competitive and capable of stealing market share from Taiwan Semiconductor Mfg. Co. Ltd., he said.
“You can imagine how much pressure the Trump administration would put on the Nvidias and Broadcoms right now to get them to look at it again.”
Moorhead says that these developments could lead TSMC to explore a joint-venture with Intel, which could be a material benefit for Intel in terms of capital.
What JD Vance’s remarks could mean for INTC
Patrick Moorhead anticipates that Intel will benefit from “some manufacturing tax breaks” as part of government’s commitment to onshoring chip manufacture.
He’s convinced, all in all, that INTC shares are now at their lowest point.
“One of reasons why its designs did not go over as well they could have was because it was using a manufacturing process that was less than competitive.” In the CNBC interview, he said that 18A will change this.
Intel stock is currently paying a dividend yield at 2.07%, making it a very attractive investment.
Intel’s recent financial highlights
Moorhead’s comments come a few weeks after Intel announced better-than expected results for its fourth quarter.
The chip giant made 13 cents per share on revenue of $14.26 billion, which was higher than the 12 cents per shares and $13.81 Billion that experts had predicted. INTC confirmed in its earnings release that it is “taking actions to improve our competitive position and create value for shareholders.”
Intel is also searching for a potential buyer for a minority stake it owns in Altera, a company that makes field-programmable gate array (FPGA) chips. It acquired Altera for $14.5 billion back in 2015.
Intel will be able to use some of the capital saved for future growth.
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