Trump is 'unlikely' to support TSMC running Intel's fabs — US gov't downplays chances of TSMC takeover

According to a high-positioned source of Reuters, the Trump administration is unlikely to approve a foreign company managing Intel's U.S. Semiconductor manufacturing facilities to run. The comment was made about Intel's reported engagement with TSMC. Although the new U.S. Government supports foreign investment in American industrial might and science innovation, it wants U.S. Companies to remain American.

"President Donald Trump's administration may not support Intel's U.S. Chip factories being operated by a foreign entity," a White House official told Reuters. While foreign investment in domestic manufacturing is encouraged, the White House prefers that Intel's fabs remain under American control.

Discussions about a possible agreement to spin off Intel's leading-edge fabs with EUV lithography tools in the U.S., convert them to TSMC's manufacturing technologies (which is close to impossible), and then operate them by TSMC surfaced after reports indicated that the U.S. Government allegedly proposed the idea to TSMC, which responded positively. Then, Bloomberg noted that the deal could involve other American companies investing alongside TSMC, ensuring production capacity for them and that the operation is not under foreign control.

Intel has poured billions into its fabs in the U.S., assuming both in-house and contract manufacturing, but has yet to become a viable manufacturer for others. However, it has landed a limited amount of customers so far.

If TSMC were to take over Intel’s facilities, it would have to make significant operational adjustments since chip manufacturers use entirely different process technologies. Running these fabs would require TSMC to share proprietary manufacturing processes with Intel employees, which would be a significant concern given the industry's competitive nature. At the same time, Intel would have to relinquish direct control over its production and, perhaps more importantly, process technologies, fundamentally altering its business model. The fate of Intel's foreign investments would also be unclear.

Intel has historically designed and produced its chips. Moving forward with this deal could push Intel toward becoming a design-focused company, shifting its role in the industry and lowering its gross margins below its historical set of well over 50%. On the TSMC side, the deal could impact the company's gross margin of 55%, which the firm's management has been trying to protect and increase over recent years.