Talk of Broadcom and TSMC grabbing pieces of Intel lights fire under investors

Chipzilla's design and manufacturing limbs said to be on the table

Venture capitalists are circling Intel amid talk that the beleaguered chip giant may be carved up between Broadcom and TSMC, with one taking the design biz and the other the manufacturing fabs.

Wall Street loves theorizing on takeovers or buyouts, and the latest stems from Intel's ongoing difficulties over the past year or so that have even seen senior engineers at the firm openly discuss the possibility of spinning off its foundry business.

Reports earlier this week involved Broadcom, which gobbled up VMware just over a year ago. As such, CEO Hock Tan is understood to be eyeing up Intel's chip design and marketing businesses with a view to a possible purchase, conditional upon someone else taking on Intel's silicon manufacturing operations.

That someone else was claimed to be TSMC, already the world's largest producer of chips and always at the cutting edge of silicon technology. Taiwan-based TSMC was reported to be "considering taking a controlling stake" in Intel's factories at the request of the Trump administration.

This last point must be considered extremely unlikely, given the newly elected President's "America first" policies and his publicly expressed desire to bring manufacturing back under the control of US corporations. A White House official told Reuters that while the White House supports foreign companies investing and building in America, it would be unlikely to back a foreign firm operating Intel's fabs.

In light of this, Hendi Susanto, vice president & portfolio manager at Gabelli Funds, agreed that "the US government views Intel fabs as national assets and security interests. Therefore, we believe majority control and ownership of Intel will remain within the United States."

But he added that "buyers of Intel's assets will have a rare opportunity of conducting transactions when all Intel's major markets are still experiencing downturns – from Mobileye, Altera FPGA, PC, and traditional server markets. It is a classic situation of Buy Low Sell High."

On Broadcom, Susanto opined that "we believe Broadcom can transform Intel's struggling businesses to make Intel relevant again, first to re-establish Intel's leadership and second to pursue the explosive growth opportunity in AI."

As for TSMC running Intel's US factories, Susanto suspects this "could be a winning strategy for Intel, TSMC, and the US government's national interest," as TSMC could help Intel fix its manufacturing roadmap and execution, including the use of EUV technology.

However, the moneyman added: "TSMC is the one that can lose more," and he highlighted the possible difficulties in protecting the manufacturing intellectual property of the respective companies.

Nevertheless, Intel stock jumped 16 percent this week following word of potential deals to split the company in two.

MarketWatch quotes Bernstein analyst Stacy Rasgon as saying that Intel's stock could climb even higher if an agreement in reached, however, "a lot seems like it needs to happen to get there, with multiple moving parts involving executing a complex company split while simultaneously figuring out how to stabilize and/or possibly sell the fabs."

All this talk has ruffled some feathers at Intel. One senior figure made his position clear - albeit briefly - in a now-deleted post on LinkedIn which claimed Intel is starting to take back a technical lead in silicon, and carving it up would be a "horrible, demoralizing mistake."

"Intel 18A, Intel's '2nm' node is nearing completion, showing healthy progress, sampling chips to laptop makers, and is on track to be in Panther Lake chips late this year. Does TSMC have their '2nm' node, N2, up and running? No. Neither company has a '2nm' node at this point. However, Intel is on track to have theirs in production sooner," wrote Joseph Bonetti, principal engineering program manager.

Looking to future production nodes beyond N2 and 18A, Bonetti's LinkedIn post added: "These will likely need ASML's latest EUV tools called high numerical aperture (high NA) EUV. Intel is the only foundry that has one of these tools up and running and performing high NA R&D."

Intel, he said, expects to have at least a one-year head start with high NA. "So who would be helping whom exactly if there is a joint venture?"

We approached Intel, Broadcom, and TSMC for comment, but none was forthcoming. ®