Is Intel Spinning-off the Foundry unit?

By Daniel Morgan, Synovus Trust Senior Portfolio Manager
Synovus Trust Company, N.A.

Rumors that the Intel board is exploring splitting up the company — with Taiwan Semiconductor (TSM) interested in the foundry unit — was perceived as good news for shareholders. On the Foundry side, a deal where TSM would own all or a portion and operate the fabs would expand its U.S. footprint to support key customers like Advanced Micro Devices (ADM), Apple, Nvidia and Qualcomm, especially if those companies and the U.S. government became partners. On the other hand, a foreign entity controlling critical U.S. IPs might be a nonstarter. In addition, the TSM and Intel fabs run on extremely different technologies, so there are no scale advantages.

Intel typically focuses on manufacturing its own designs in-house. Where TSM produces chips for fab-less chip design companies like AMD, Broadcom, Nvidia and Qualcomm. However, the possibility of TSM participating in some sort of group or consortium that buys out the Intel Foundry’s business may not seem as far-fetched as originally thought! Though TSM having a majority ownership or controlling stake as a foreign entity is unlikely. Washington, D.C. wants Intel Foundry to be healthier than it currently is, regardless of whether Intel Corp remains the sole owner. And Intel’s current leadership seems ready to downsize its Foundry position or sell it all together.

Without government support or another financially stronger partner, it will be difficult for the Intel Foundry unit to raise enough capital to continue to build out more fabs at a reasonable rate. The Foundry business, which Intel fully launched in Q124, lost $13 billion in 2024. Therefore, the cost of capital would be really high if the Foundry unit directly issued debt. Possibly, with more government support and strategic partnership, the Foundry can catch up technologically with TSM’s technology and woe over more fabless producers.