Intel considering strategic options- What’s the impact on Taiwan Semi?

Reports over the weekend stated that Intel (NASDAQ:) is exploring its strategic options to turn around its business, with possibilities such as scrapping some factories, selling assets, as well as splitting or spinning off its Foundry and product/design teams.

In a note to clients on Tuesday, analysts at JPMorgan assessed the potential impact on Taiwan Semi (TSM).

The firm said that overall, it “could be a small positive to TSMC.” However, they note that the size of Intel’s outsourcing TAM has become smaller compared to the opportunity from artificial intelligence semiconductors.

“If we were to see further capex reductions or mothballing of new Fabs, this would imply slower progress in external Foundry,” said JPMorgan. “Leading edge Foundry remains a scale business and any such move to downsize would drive the economics further in favor of TSMC – especially at a time when TSMC is also expanding their geographic footprint.”

Furthermore, JPMorgan believes the implications of splitting the company into Foundry and Product design would likely be positive for TSMC. “If Intel product division needs to become more competitive, it may have to outsource more compute products to TSMC,” the investment bank adds.

JPMorgan adds: “We do not believe that Intel Foundry arm is likely to become a credible competitor for TSMC in leading-edge process in the next three to five years, even as a separate entity.”