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Investing.com -- On Thursday, a report emerged about potential talks between Taiwan Semiconductor (TSMC) and Intel (NASDAQ:INTC) regarding a joint venture. According to The Information, the deal could involve TSMC acquiring a 20% stake in a new company that would oversee Intel’s chipmaking operations, with Intel and other U.S. semiconductor firms holding the majority of shares.
TF International Securities analyst Ming-Chi Kuo has commented on the market rumors surrounding TSMC’s possible assistance to Intel. Kuo indicated that these speculations are likely to continue. He highlighted TSMC’s superiority in advanced node production yields, attributing it to a complex mix of factors including employee management, organizational culture, and market intelligence, among others.
Kuo pointed out that for TSMC to aid Intel in improving its production yields, whether through consulting, equity investment, or a joint venture, TSMC would need to secure management control and implement its management model at Intel. Without this control, Kuo believes any effort to help Intel would likely be a time-consuming process with a high chance of failure.
The analyst further explained that while TSMC’s management approach is not the only successful one in the foundry industry, it is the only one that TSMC knows and has proven to be effective. Kuo raised several questions regarding the potential collaboration: whether TSMC can gain management control at Intel, whether the team proposing the collaboration can accept the risks of organizational transformation and potential failure, and whether a waiting period for results would be acceptable.
Kuo also mentioned that if the U.S. government were to request TSMC’s assistance in enhancing Intel’s production yields, the proposing team must consider the likelihood of TSMC gaining management control and the associated risks. He concluded by suggesting that if the joint venture is merely a formality without the expectation of tangible results during the current administration, then his analysis might not be relevant.
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