Investors in Intel Corp. currently seem to be rejecting recent rumors that the chip giant would be divided in two as part of a major merger agreement.
Intel’s hopes of finding a buyer for its design business were further dampened when Hock Tan, the CEO of Broadcom Inc. (AVGO), told analysts late Thursday on the company’s earnings call that he was “too busy” to pursue any mergers and acquisitions.
Even before Tan’s remarks, investors had already grown disenchanted with Intel’s merger chances, as evidenced by the company’s stock (INTC). Despite a slight decline in Friday’s trading, the stock is down almost 25% from its peak closing of $27.39 on February 18 of this year.
The Wall Street Journal revealed last month that Broadcom was considering a bid for Intel’s chip-design and product division, according to early talks within the company. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) (TW:2330) was rumored to be considering acquiring portions of Intel’s manufacturing and foundry businesses at the same time.
President Donald Trump’s strong criticism of the U.S. Chips Act, which he described as “a horrible, horrible thing” in his congressional address on Tuesday, is another problem that Intel investors are evaluating. He also praised TSMC’s recent announcement of a huge agreement to invest an additional $100 billion in its production facilities in the United States.
“We don’t have to give them money,” Trump declared, adding that his most recent rounds of trade tariffs encouraged TSMC and other chip manufacturers to expand their facilities in the United States.
“They will come because they won’t have to pay tariffs if they build in America,” he stated to Congress. “You should get rid of the Chips Act.”
These recent events appear to be a mixed bag for Intel, and its stock price reflects that. Intel shares surged when Vice President J.D. Vance praised American chip manufacturing on a February European tour, raising investor expectations that Trump may help the company, which was once the jewel in the crown of the U.S. semiconductor industry, merge with another company. He appeared to be attempting to persuade more American chip manufacturers to employ Intel’s commercial manufacturing division, at least.
In response to this week’s revelation, however, Semiconductor Advisors president Robert Maire told MarketWatch that “Intel was left at the side of the road.”
Few in Silicon Valley, however, thought that an alliance between Intel and longstanding rival TSMC would have been advantageous. “Intel always had a different process than TMSC,” said David Yoffie, a former Intel board member and Harvard Business School professor who co-wrote a piece for Fortune explaining why such a takeover was such a poor idea.
Since it needs to acquire additional major chip manufacturers as clients, Intel’s manufacturing division has been sluggish to reach its full income potential. Kevin O’Buckley, the general manager of Intel’s foundry division, recently met with Stacy Rasgon, a Bernstein Research analyst, who reported that the Intel official recognized this as a fundamental business issue.
“Their competitor has a customer-service mindset that Intel has never developed, but needs to in order to succeed in foundry,” Rasgon wrote in a letter to clients this week.
Intel’s recent decline in process-technology leadership was another significant setback. Although Intel has made significant progress with their 18a next-generation process, it still lags somewhat behind rival TSMC in terms of manufacturing nodes.
Intel’s next-generation Panther Lake processor, the first product slated for volume on 18a, has been rumored to be behind schedule. According to Rasgon, O’Buckley stated that “the current noise around poor yields etc. was ‘FUD'”—this stands for “fear, uncertainty, and doubt.”
At Morgan Stanley’s technology conference this week, Intel’s VP of investor relations, John Pitzer, responded to a query about rumors that Panther Lake had delayed by stating that it will ship in the second half of this year. “We feel really good about the progress that we are making,” Pitzer stated. “In fact, if you look at where our yields are on Panther Lake today, they’re actually slightly ahead.”
To gain more customer trust in manufacturing, however, it appears that a further division between the two companies is required. Although Rasgon stated that the company believes it has enough resources to meet its goals, the foundry industry is not anticipated to break even until at least 2027. Under previous CEO Pat Gelsinger, Intel and Brookfield Asset Management Inc. (BN) (BAM) inked a $30 billion agreement in 2022 to finance new fabrication facilities, or “fabs.”
In the meantime, Intel has not commented on its search for a new CEO to succeed Gelsinger, who retired late last year following a troubled, nearly four-year term.
