Trump Probably Won’t Back TSMC to Operate Intel’s Factories, US Downplays Takeover Odds

A source closely connected to Reuters has indicated that the Trump administration is likely to oppose a foreign entity’s management of Intel’s semiconductor production facilities in the U.S. This statement arises amidst discussions about Intel’s potential collaboration with Taiwan Semiconductor Manufacturing Company (TSMC). While the current U.S. administration is open to foreign investments in the nation’s industrial and technological sectors, it prefers that American companies maintain national ownership.

A White House official expressed to Reuters that “The administration under President Trump may not favor the idea of Intel’s chip manufacturing plants in the U.S. being managed by a foreign company.” The administration promotes international investments in its manufacturing sector but insists that the control of Intel’s manufacturing sites should stay within the country.

Speculation about a potential deal that would outsource the management of Intel’s advanced manufacturing facilities, which use extreme ultraviolet (EUV) lithography, to TSMC arose after it was suggested that the U.S. government floated this proposal to TSMC, who showed interest. Bloomberg later reported that this arrangement might also involve other U.S. companies as investors to ensure that the production capacity benefits them and that the operations do not fall under foreign jurisdiction.

Intel has invested heavily in its U.S. fabs, handling both its own manufacturing needs and those of external clients, although it has only managed to secure a limited client base to date.

Should TSMC assume control over Intel’s facilities, substantial operational changes would be necessary due to the differing chip manufacturing technologies used by each firm. TSMC would need to integrate its proprietary processes with Intel’s operations, a move fraught with risks given the competitive nature of the industry. Moreover, Intel would need to cede direct oversight of its production capabilities and, crucially, its process technologies, which would represent a fundamental shift in its business model. The implications for Intel’s international investments would also be a major concern.

Traditionally, Intel has both designed and manufactured its chips. Proceeding with this deal might pivot Intel towards focusing more on design, altering its industry role and potentially reducing its historically high gross margins, which have consistently been well above 50%. For TSMC, this deal poses a risk to its gross margin, which currently stands at 55% and which its management has been keen to maintain and improve.