Intel ’s plan to get back into semiconductor leadership has been well-received by investors. But Taiwanese chip champion TSMC still looks well-placed to weather the challenge.
Pat Gelsinger, Intel’s chief executive officer, surprised the market this week by saying the company would go into the foundry business—making chips for others. Intel has been known as an integrated device manufacturer, designing and making chips in-house. Mr. Gelsinger’s IDM 2.0 vision arrives as Asian rivals like TSMC and South Korea’s Samsung Electronics are getting ahead in cutting-edge chip-making technology.
TSMC’s shares have fallen around 3% since Intel’s announcement. But near-term impact on TSMC is unlikely: The chip shortage means it has more business than it can deal with. And for now, Intel will still need to outsource the making of its most advanced chips to the likes of TSMC.
Intel will spend big to catch up, building two plants in Arizona for $20 billion while raising this year’s capital expenditure by more than 30% to between $19 billion and $20 billion. It is hoping demand for advanced chips will spread the costs and justify the cash outlays, but Intel’s previous attempt at entering the foundry business, in 2013-14, went nowhere.
And TSMC isn’t standing still. The company has raised this year’s capital-expenditure guidance by more than 40% to between $25 billion and $28 billion. Even if Intel’s plan works as it hopes, its technology will likely still be behind TSMC’s. TSMC has had years of serving a diverse customer base from Apple to Nvidia and enjoys a better cost structure. It is also unburdened by the inherent conflict of interest Intel bears, as a company that also designs and sells its own chips. Intel says it will keep the foundry independent, but customers like AMD and Apple will likely hesitate to give it their orders.