Key Takeaways
- Advanced Micro Devices is reportedly considering becoming an Intel Foundry customer, a move that would make it one of several companies following in the Trump administration’s footsteps by throwing the struggling chipmaker a lifeline.
- The White House has made domestic semiconductor manufacturing a priority as the U.S. seeks to edge out China in the global AI arms race.
- Some analysts are skeptical that Intel has the manufacturing capabilities required to secure the kind of foundry deal President Trump and Wall Street are hoping for.
Intel (INTC) was down and out, and then the White House flipped a switch and made it one of the hottest stocks on Wall Street.
Semafor yesterday reported chip designer Advanced Micro Devices (AMD) was in early talks to become an Intel Foundry customer. The report noted it was unclear how much of AMD’s business would go to Intel instead of its primary manufacturing partner, Taiwan Semiconductor Manufacturing Co. (TSM), or if the deal would include a direct investment.
Why This Matters To Intel Investors
The White House is pushing hard to prop up Intel, which has spurred an outpouring of support for the embattled chipmaker from major tech companies. But none of the deals announced so far have come with commitments to use Intel’s foundry. A manufacturing deal would signal more concrete support for Intel, giving investors more faith in the sustainability of its turnaround.
The agreement would make AMD the latest in a string of entities partnering with or investing in Intel to extend a lifeline to one of the only U.S. companies capable of manufacturing advanced semiconductors. Japanese tech investor SoftBank in August invested $2 billion shortly before the White House converted Intel’s CHIPS Act grants into an approximately 10% equity stake. Nvidia (NVDA) followed suit in September when it said it would invest $5 billion and partner with Intel on new products. Intel has also reportedly discussed a tie-up with Apple (AAPL).
Intel’s stock has soared amid the shows of support. Shares have doubled in value since hitting a year-to-date low in early April, and are up about 80% since CEO Lip-Bu Tan sat down with President Donald Trump in early August. It was shortly after that meeting that talk of the government taking a stake in Intel seemed to turn the tide in its favor.
President Trump has made reviving American manufacturing a cornerstone of his second term, and semiconductors have taken on extra importance in the context of the U.S/China AI arms race and geopolitical tensions centered on Taiwan, where the majority of the world’s most advanced semiconductors are made. The White House appears to think Intel is America’s best hope for making the kinds of chips deemed essential to securing technological and military superiority.
Securing AMD as a foundry customer would be a major win for Intel, which has struggled for years to compete with TSMC, the world’s largest and most advanced contract chip maker.
Why a Foundry Deal May Not Be in the Cards
However, some analysts are skeptical that a foundry deal will materialize.
“We could easily believe stories of companies (AMD or otherwise) seeking equity stakes, possibly at the encouragement of the administration,” wrote Bernstein analyst Stacy Rasgon in a note on Thursday. “Hopes for a foundry deal (from anyone) seem very premature to us though, and not just because Intel and AMD remain locked in a competitive product battle that the latter is clearly winning at the moment.”
The biggest challenge facing Intel in its efforts to strengthen its foundry business is capability, according to Bernstein. Intel’s new 18A manufacturing process, which is supposed to make chips faster and more energy efficient, “has suffered from delays and a general lack of foundry interest,” wrote Rasgon in August. And its next-gen 14A process, he says, is still years off.
Investments from the government and tech partners may give Intel the capital it needs to improve its processes, but that will take time and Rasgon “suspect[s] concrete foundry announcements will have to wait until Intel can definitively demonstrate capability.”
In the meantime, Rasgon expects to see more rumors of foundry deals bubble up as the White House carries on with its campaign to reinvigorate America’s industrial base.