In the last few weeks, Intel’s stock charged ahead by more than 20% as investors hoped for a breakup of Intel, the United States’ top manufacturer of leading-edge semiconductors. The Biden administration, with the support of Congress, tried to save American chip manufacturing with the CHIPS Act. $52 billion was approved in part to establish at least one American headquartered cutting-edge chip manufacturer. Some progress was made, including inducing Taiwan Semiconductor Manufacturing Company (TSMC), the world leader in chip manufacturing today, to invest in the United States. But the Commerce Department spent two years slow walking the implementation of the legislation, limiting the availability of funds, demanding social goals, and restricting ownership options. In a word, the Biden administration failed.
In the meantime, given the right conditions, the only player that can accomplish the goal of making America a leader in advanced chip manufacturing is Intel, which has continued to flounder. The CEO was fired in November, the board had no succession plan, and the company has become dependent on financial engineering to give shareholders a short-term boost.
Intel’s heyday was built on its unique position as an integrated design and manufacturing business. But the world has changed faster than Intel has adapted. In the last five years alone, competition in manufacturing from TSMC and in chip design from Nvidia, AMD, and others has dethroned Intel in both markets. The company no longer generates enough profits from its design business to fund the enormously expensive, never-ending construction and reconstruction of its manufacturing plants to produce leading-edge chips. But Intel is still a very important player, given its size and underlying capabilities. Its failure risks America’s long-term interest for all computing issues, including but not limited to advances in artificial intelligence. The disposition of Intel’s design and manufacturing businesses is too important to be left to short-term dealmakers.
Can the Trump administration succeed where the Biden administration failed? According to published reports, Trump has been pressuring TSMC to take over and manage Intel’s plants. Intel’s manufacturing capability consists of a global supply chain of research, manufacturing, and assembly that has plants and people in Arizona, Oregon, and California—as well as plants under construction in Ohio, Ireland, Israel, and a number of other countries. The total book value is roughly $100 billion. There is no bigger set of assets on the auction block anywhere in the world. The problem is that Intel’s technology in 2025 is at least a generation behind TSMC, and customers such as Nvidia and Qualcomm are unwilling to work with a potential competitor that’s lagging in technology.
Why would TSMC buy this network—this long, heavy ball and chain? Presumably only if the United States government pressured it to do so, perhaps holding Taiwan hostage to America’s defense capabilities. And even then TSMC presumably would want the United States government to provide billions of dollars, and to arm-twist the major American design firms including Apple and Amazon to place orders for Intel’s capacity. Even if TSMC was willing to move forward, there is little doubt that its leading-edge research would remain in Taiwan. As a result, TSMC’s leading-edge manufacturing would also remain in Taiwan because of the tight coupling between the two. Over time, TSMC would most likely lay off the majority of Intel employees in research and manufacturing and shut down the fabs.
This outcome is clearly not in the best interest of the United States. First, a world-leading Western chipmaker has to have its research arm located in the U.S. or the West, not Taiwan. Second, granting what, in effect, is a global monopoly in advanced chip manufacturing to TSMC would be a devastating blow down the road to America’s world-leading design firms. They use TSMC now, but ultimately, competition with an American foundry is needed to ensure that the innovation races of the last 40 years will continue, and pricing will be more competitive.
Intel has led in the past. An American foundry based on Intel’s factories may lead in the future. It is not in the interest of the U.S. chip industry or America to cede advanced chip manufacturing to TSMC. Leaving the fate of the entire world’s computing and communications industry in a risky geopolitical location defies common sense. It might solve a short-term problem for the Trump administration but saddle the U.S. and the Western world with unreasonable risks.
The right answer—and it’s been the right answer for years—is for the United States to insist that Intel split its twinned businesses. The United States government should demand that Intel’s board separate the manufacturing business, which can only be sold to a U.S. or Western consortium of private sector investors. The necessary conditions for any investors to take over this massive but broken network are: (1) the United States government has to provide roughly $10 billion of capital, which should be structured as nonvoting equity so that the taxpayer can share in success (as was done in the bank bailouts 2008), and (2) the major American semiconductor design firms including Intel’s design business must provide guaranteed orders. All leading semiconductor design firms need a second source, and a healthy American foundry based on Intel’s assets is the best option. These two conditions are necessary to make the asset sufficiently profitable to attract investors to run it. These private investors can bid for the assets in an auction with the terms outlined here clearly stated.
TSMC is a world-class firm. Competition with it is in the best interest of the whole globe. But turning all advanced chipmaking over to TSMC as a monopoly is not.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
David B. Yoffie is a professor at Harvard Business School. Reed Hundt is a former chair of the FCC. Charlene Barshefsky is a former U.S. Trade Representative. James Plummer is the former Dean of Engineering at Stanford. Professor Yoffie, Mr. Hundt, Ambassador Barshefsky, and Professor Plummer all served as longtime directors of the Intel board.
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