In the shadow of TSMC and Nvidia, Intel needs a comeback. It’s getting a boost

A lot of the talk in metro Phoenix about the booming semiconductor manufacturing industry of late has been about the Taiwan Semiconductor Manufacturing Company, or TSMC, which is building a massive plant in north Phoenix worth $165 billion.

But now, another semiconductor manufacturer that’s been in the Valley for decades is trying to stage a comeback. Intel laid off 700 workers in Arizona in July, and announced its intention to become a “leaner, faster and more efficient company.”

In August, the Trump administration announced it was taking a 10% stake in the company. And now, the Wall Street Journal reports it’s looking to companies like Apple and TSMC to invest and partner with it in its bid for a new start.

Lead Deals reporter Lauren Thomas wrote about it and joined The Show.

Full conversation

LAUREN THOMAS: This is a company that I think finally, if people weren’t already aware of this are waking up to the fact that it is core to the U.S. and this idea of the U.S. kind of having a national champion when it comes to chip manufacturing. And Intel for years was dominant in its sector. But then I think, as advancements in AI came along very quickly, started to fall behind.

And fast forward to today. You’ve got these behemoths like Nvidia that effectively are dwarfing Intel. And it’s fallen behind, hasn’t maybe acted nimbly enough or made key investments or bold risks over the years to get them where some of their competitors are today. And as a result, that puts the U.S. in a precarious position, and companies become super reliant on these foreign operators — including Taiwan Semiconductor Manufacturing, TSMC — to make chips.

And so it’s reached really a critical moment, I think, in the past 9 to 12 months, if you will. You’ve seen some turnover in the C-suite at Intel, big changes in that upper echelon and just the company trying to to reset and effectively get back on its feet.

LAUREN GILGER: So you’re reporting now that they’re seeking investments and kind of partnerships from companies like Apple and TSMC to try to aid in this comeback. They’re trying to — I think you described it as “shedding their has-been status.” What does this look like?

THOMAS: Yeah, exactly. Intel is really fighting to keep its relevance or become relevant again, I guess you could argue, and just make sure that it has a more diversified kind of supply and customer base. That is definitely the goal. And the current CEO, Lip-Bu Tan, has made that very clear that that’s the goal.

And so what do they require then to get there? Well, they need capital. And under the Biden administration, the CHIPS Act was set up, and Intel was earmarked a dollar amount as part of that CHIPS Act that it would receive over a set amount of time in order to help in its efforts — including, by the way, to invest in plants like in Arizona.

But when the new administration came in, Trump took over. Not all of that money had been doled out by the time that Biden left office. And Trump has decided to rewrite those rules effectively and redo the CHIPS Act, rethink that. And so that gets us to some of these recent developments, where the U.S. government comes in and takes a stake in Intel, effectively using that CHIPS money.

And it’s saying, “OK Intel, if we’re going to give you this money, we as a government want something in return from that.” And that is the stake.

GILGER: OK. So that was a pretty unprecedented move where the U.S. government took this stake in Intel. Now they’re looking at this comeback. How successful might this be? Like what does the industry think about this?

THOMAS: Yeah. Well, I think there is a lot of momentum around it right now, just given the fact that Intel is really the only company at scale like where it is today, that is capable of kind of being this, like I said earlier, this national champion. And this is not something — all this manufacturing and these capabilities — is not something that you can just build from the ground up overnight.

So they’re already in a position to be able to do this. But again, they just need the customers. They need the latest tech. They need people backing them. And I think that because this is the case, you’ve seen a lot of other tech CEOs, whether it’s at Tim Cook over at Apple, Jensen Huang at Nvidia, the SoftBank CEO (Masayoshi) Son rallying around Intel because there’s this realization that … if anyone’s going to have these capabilities and as a result help the United States, it’s got to be Intel.

And so that’s where you are starting to see some of these investments pour in. And it’s interesting. I did some reporting and basically uncovered that a lot of these conversations had been going on even prior to Trump taking office earlier this year. For whatever reason, they were taking longer than some at Intel might have wanted. They were dragging along. The company wasn’t striking these deals as quickly as they wanted to.

So I think if anything, what’s happened here lately is just that everything is sped up. There’s been more of an emphasis on just, “We need to act fast. We need to fix this problem now.” You are seeing some of these deals. What had been talks for so long, months and months of conversations, deals are finally starting to materialize.

So that’s where Nvidia has announced a roughly $5 billion investment in Intel. Like I said, SoftBank, which is over in Japan, has made a $2 billion, roughly, investment in Intel. We reported recently at the Journal that Apple is thinking about a similar deal of its own, and that Intel is also in talks with a number of other big tech companies in the U.S. about similar partnerships.

And I think the end goal, though, is Intel, it makes chips, and it needs customers to buy those chips. It’s ironic in a way. Intel is actually a customer of its own. Intel makes chips. But then Intel as a company also uses some of those chips that it makes.

But Intel can’t be its only customer, so it needs other customers. It needs these other companies to get on board. I think that’s the next step that we’re really looking for here.

GILGER: Let me ask you about the H-1B visa fee that the Trump administration slapped on. This is like a $100,000 fee for companies when they get those H-1B visa, new applications. And now obviously these companies can largely afford this, but it does seem to be an effort to dampen that program.

Intel is by and far away the biggest user of H-1B visas in Arizona. Could that have an impact here?

THOMAS: Oh yeah. And I think the verdict is still out. Like we’re seeing how this is going to play out. It’s been interesting because I feel like you see voices, especially within the tech industry on both sides of the aisle here. And obviously these visas have become kind of a mainstay in the tech industry. And that’s allowed big tech companies in particular to hire these really highly skilled workers, or what they see as highly skilled workers from overseas.

You’ve seen, for example, the Netflix co-founder Reed Hastings come out and say that it could mean the end of the lottery system if the H-1Bs are capped at, what is it, 85,000 workers annually? And others are worried that it could really hurt startups as a result.

I don’t know that Intel has specifically weighed in on this, at least publicly, to my knowledge. But I get the sense that certainly there will be some sort of impact on companies, corporations in the U.S., in particular tech companies.