Intel isn't dead. They've made some bad choices and investments but they're still huge. They have $30 billion in gross profit per year on an utterly boring, non-hype based business model. Get rid of some dead weight, write off the bad investments, improve their foundry business and their value easily grows multiples of what it currently is.
On top of it already being a shrewd business deal, doing a favour for the US government also potentially buys protection for TSMC and Taiwan from China. Plus the immediate tariff relief.
Intel is not profitable. They have negative eps and negative free cash flow. The cash flows from existing products can't be considered in isolation. If their R+D and Capex investments stopped, the sum total of the existing+legacy cash flows wouldn't nearly cover Intel's substantial liabilities.
They also have 50 billion dollars in debt, and their cash flow situation has gotten so desperate that slices of future fab revenue have been pawned off to private equity, who now has a senior claim on the assets (as do the bondholders).
An equity stake and Intel is not something that a TSMC would want without coercion. It's just not a very attractive place to be an equity holder.
>Get rid of some dead weight, write off the bad investments, improve their foundry business and their value easily grows multiples of what it currently is.
As if it was that easy. The company has now been through multiple CEOs attempting to mix up these ideas in various ways. The last CEO tried to do a Hail Mary to improve the foundry business, but the balance sheet can't support it. Now the new CEO is essentially writing off those investments and putting them on the back burner. Considering that, getting rid of the dead weight will be difficult, considering the company itself is largely dead weight... The quality of their employees is not good, or at least not nearly at the level that needs to be (18A yields are alarmingly low, and that's the critical product that basically determines the company's future. 14a is already looking more and more distant despite it being the purported savior not even a year ago).
Realistically, their financial situation puts them right at the precipice of needing to shed the fabs, and/or permanently continue down the path of more Brookstone-like partnerships where they can spread the burden (which then caps the equity holder upside).
There is nothing "easy" about the current situation. Maybe without the 50 billion in debt, but nearly all of remedial paths are running into nasty balance sheet constraints. There's no more room to spend quarters rejiggering the thing.
Current assets are $43 billion. Total assets are $192 billion. $30 billion yearly in gross profit. Debt is only $50 billion. They still hold 75% market share. Repeat, they still sell 3 times more chips than AMD.
Yes, their balance sheet isn't as good as some fabless competitors but if TSMC helps them with their 14a yield then it looks like a good investment.
Also, having TSMC on board will surely help with their fab business. Again, between the US government needing them to survive, TSMC on board, plus the fact they still do have a decent core business, I think Intel (and TSMC's investment) will be fine.
It's actually better than that. TSMC wouldn't help intel with their 14a node. They would kill it, fire all of Intel's foundry R&D, and just build TSMCs 14a node.
You euphemistically called it "help", but all you agreed to was a hostile takeover of a competitor only to gut said competitor. If a company genuinely thinks they are ahead, they don't have to do these petty tricks unless they want to nib a promising competitor in the bud while they are small and cheap. Intel is neither, nor is it a promising purchase. The only thing of value they possess is x86 IP.
But the US government has proven to be unreliable in maintaining commitments -- even words on paper are meaningless as it doesn't seem to stop them from changing the deal later and demanding more ("I have change the terms of our agreement, pray I do not alter them further"), and then another request demanding more. Would TSMC be doing the government a favor and gaining protection, or are they being extorted? ("would sure be a shame if we doubled your tariffs again...")
Does it really matter? Does TSMC have a choice either way?
They’re a globally important company but they’re not ASML and they’re stuck between two superpowers and the threat of potential total war. They’ve had the misfortune of being sucked into geopolitical maelstrom and those tides are far too strong for any company to resist.
EUV was developed with in a Cooperative Research and Development Agreement between the US Department of Energy, Intel, ASML, and so on - giving Congress control over who ASML sells the EUV technology to.
So yes, US companies do have a choice. They can lobby Congress to cut off TSMC from their main hardware and parts supplier entirely, crippling it altogether, except for their Arizona plant which is ripe for nationalization for natsec.
TSMC certainly brings a lot to the table but if they were completely knocked out, it would just deprive the world of the top end of fab capacity for a while. On the other hand almost every fab in the world depends on ASML for parts and maintenance, even the old fabs on legacy nodes.
Taiwan is too dependent on the USA ATM to make that choice. If they were to go it without the USA, the only choice would be to become an actual bonafide province of China, they aren't going to exist on their own. Almost everyone else outside of eastern Asia, however, can make a different choice.
I think there's reason for the EU to ensure that there's no semiconductor manufacturing monopoly.
So the EU offering something like nuclear weapons sharing à la that which Germany etc. would probably be reasonable if the US bullied Taiwan too hard. But I don't think it's happening, I think people want good relations with China.
If it were a win-win relative to their other options, they wouldn't have to be forced into it. They may have been able to make the best of it, but let's not pretend value is being created.
> Will Apple, AMD, and nVidia continue to trust TSMC if it owns half of Intel?
It doesn't matter because none of them have much choice. None of them own fabs and Samsung's capacity is significantly less than TSMC's. Plus Samsung also designs chips.
Not sure about that. Buying Intel would make TSMC a direct competitor to most of its biggest customers which could incentivize said customers to look for alternative foundry.
Intel isn't dead. They've made some bad choices and investments but they're still huge. They have $30 billion in gross profit per year on an utterly boring, non-hype based business model. Get rid of some dead weight, write off the bad investments, improve their foundry business and their value easily grows multiples of what it currently is.
On top of it already being a shrewd business deal, doing a favour for the US government also potentially buys protection for TSMC and Taiwan from China. Plus the immediate tariff relief.