Intel's foundry business appears headed for a potential spinoff under newly appointed CEO Lip-Bu Tan, according to comments from semiconductor industry analyst Eric Chen, who is now serving as a partner of Cornucopia Capital. The struggling chipmaker, which reported a US$13.4 billion loss in its foundry division last year, is likely to separate its manufacturing operations from its product business as Tan pursues a strategy markedly different from his predecessors.
Intel is speculated to undergo a strategic shift toward fabless operations, focusing on high-margin chip design rather than manufacturing. This approach would mirror successful fabless companies like Nvidia, whose growth has vastly outpaced traditional integrated device manufacturers.
Intel's manufacturing challenges have intensified as TSMC has established dominance in advanced semiconductor production. While Intel struggled with process technology transitions, TSMC captured over 90% market share in advanced chip manufacturing.
Intel's recent proposal to invest approximately US$100 billion in US manufacturing facilities, supported by US$7.86 billion in funding from the CHIPS Act, appears to be a strategic move to maintain independence amid pressure to potentially join forces with TSMC or other technology giants.
The semiconductor industry continues its substantial transformation driven by artificial intelligence. TechInsights forecasts another robust year in 2025, with semiconductor sales projected to grow by 25%, pushing market value close to an unprecedented US$850 billion.
The capital-intensive nature of semiconductor manufacturing presents a significant hurdle for any potential spinoff. Modern chip fabrication facilities require investments in the tens of billions of dollars, with TSMC spending approximately US$130 billion in capital expenditures over the past four years.
"Who will provide the capital expenditure? AMD's divestiture of its manufacturing assets in 2008 was backed by Abu Dhabi's sovereign wealth fund. Capital expenditure at that time used to be hundreds of millions, but now we're talking about tens of billions of dollars," Chen explained.
Industry experts suggest any Intel foundry spinoff would likely require multiple strategic investors, potentially similar to how GlobalFoundries was established.
While Intel's DNA has historically centered on manufacturing excellence, the economics and geopolitics of modern semiconductor production appear to be forcing a strategic reevaluation. The geopolitical realignment of semiconductor supply chains is creating new merger and acquisition opportunities.
"Because of TSMC's influence, equipment makers and material providers in TSMC's supply chain will expand to the US," Chen noted. "Smaller companies that cannot afford to build their own US facilities will likely become acquisition targets for US companies."
This contrasts with trends from the past decade when numerous Taiwanese companies established manufacturing in China and subsequently sold those operations to mainland Chinese firms. "For the past decade, China had the market and needed technology, so they were willing to pay. But the overall direction has now begun to shift," Chen explained.
Credit: AIM Ventures & FCC Partners
Article edited by Jerry Chen
