On February 13, a significant buzz arose within the tech community as rumors circulated about the U.S. government's potential involvement in facilitating a partnership between two of the biggest players in the semiconductor industry: Intel and TSMC (Taiwan Semiconductor Manufacturing Company). This development could represent a pivotal shift in manufacturing strategies, with wide-ranging implications for competition in the global semiconductor sector.

Tristan Gerra, an analyst at Baird, referenced discussions stemming from the Asian supply chain in his report released on Wednesday. He detailed plans that suggest the U.S. government might influence TSMC to send engineers to Intel’s facilities, particularly those dealing with cutting-edge 3nm and 2nm wafer technologies. TSMC's expertise would ideally help ensure that Intel's wafer production and subsequent manufacturing initiatives could be viable.

Under this proposed arrangement, there is a possibility that Intel’s fabrication facilities could be reorganized into a new entity co-owned by both Intel and TSMC, with operations possibly led by TSMC itself. Such a model might also be eligible for funding from the recently enacted U.S. CHIPS Act, which aims to bolster domestic semiconductor manufacturing.

While Gerra acknowledged that this project has yet to be confirmed and could take considerable time to materialize, he argued that this strategy makes sense within the evolving landscape. For Intel, this might relieve significant cash flow concerns and allow the company to concentrate on future designs and platform solutions, while a viable fabrication plant could attract essential fabless companies looking to diversify with reliable local manufacturing options.

As news of the potential partnership spread, Intel's stock price surged for two consecutive days. The stock's previous day jump was influenced by comments from U.S. Vice President Kamala Harris at the Paris AI Action Summit, where she emphasized the Biden administration's commitment to ensuring that the most powerful AI systems are built in the U.S. utilizing domestically designed and manufactured chips.

Insider information indicated that TSMC recently held its inaugural board meeting in the U.S. on February 12, possibly to discuss proposals presented by the U.S. government aimed at fulfilling its ambitious "America Made" objective, leveraging Intel as a bargaining chip to facilitate TSMC's operations and expansion at its Arizona facilities.

Sources revealed that TSMC was presented with three potential choices regarding these proposals:

• Firstly, TSMC might construct an advanced packaging facility in the U.S., offering comprehensive services from wafer manufacturing to backend processing on American soil.
• Secondly, the U.S. government may propose forming a joint venture in which TSMC and several prominent companies would invest in Intel’s independent foundry operations.
• Lastly, there is a possibility that Intel could leverage its advanced packaging expertise to take on packaging contracts that TSMC plans to provide to U.S. clients.

Regarding the first option, it was noted that TSMC has previously expressed reluctance toward establishing a packaging plant in the U.S., citing challenges such as labor shortages and low-profit margins. Concerns were also voiced about how such a move could jeopardize its backend partners and impact Intel, which has invested significant efforts into advanced packaging.

The second option, which involves a joint venture, is anticipated to see TSMC collaborating with other major industry players to collectively invest in Intel’s foundry business, incorporating TSMC’s technology transfer into the agreement.

The third scenario would allow Intel to manage the increased packaging orders TSMC would take on for U.S. clients. For instance, Apple has confirmed plans to have wafers produced at TSMC’s facilities in the U.S., showcasing a collaborative experience with Intel.

According to industry insiders, the U.S. government’s steadfast commitment to bolstering domestic manufacturing combined with protective measures for Intel has positioned TSMC as nearly the sole glimmer of hope for reviving local production capabilities.

TSMC has reportedly updated the progress of its wafer facilities in Arizona. The first factory has transitioned from a 5nm process to a more advanced 4nm process, kicking off mass production with plans to increase output to approximately 30,000 wafers monthly by the first quarter of 2026. The second factory is expected to begin equipment installation as early as the latter half of 2026, with production potentially starting six months ahead of schedule. TSMC projects that it will commence 2nm chip production at its Arizona site by 2028 and plans to build three additional wafer facilities by 2030, leveraging even more advanced process technologies.

Insiders have indicated that expanded investment plans, including the potential construction of a fourth factory in the U.S., have already been substantially finalized, although the timing for a public announcement remains uncertain.

Approximately two weeks ago, TSMC's founder Morris Chang shared insights during an appearance on the Acquired podcast, where he recounted a private meeting with Apple co-founder Tim Cook. During this meeting, Cook remarked, “Intel simply doesn’t know how to operate as a foundry.” Despite challenges, Intel has been revitalizing its foundry services in recent years, striving to resolve operational issues and better serve customers. With TSMC’s assistance, there may be a significant turnaround in favor of domestic manufacturing.

The potential split of Intel’s foundry operations, run by TSMC, has sparked heated discussions across various forums. Some commentators view this as a promising solution that could alleviate Intel’s financial troubles while offering TSMC a strategic advantage against tariff-related hurdles. Conversely, others are concerned that this joint venture could lead to global monopolization, inevitably driving up product prices. Additionally, many struggle to understand why TSMC would consider taking on such a precarious undertaking.

Analysts suggest that transforming Intel’s wafer facilities to meet TSMC’s operational standards will require extensive renovations and training for existing employees, emphasizing the challenges that lie ahead should this partnership come to fruition.