$INTC: The Intel Hedge against Taiwan
Why Intel Stands to Gain from TSMC's Vulnerabilities
A military conflict or blockade in the Taiwan Strait (most likely triggered by China attempting to seize or isolate Taiwan) would immediately cut off TSMC, the world’s dominant producer of advanced semiconductors. TSMC currently manufactures:
Over 90% of the planet’s most advanced chips (sub-7nm nodes)
Roughly 55% of all leading-edge logic capacity globally
In the first year of a full blockade or invasion, independent estimates (Bloomberg Economics, CSIS war games, Rhodium Group) project a loss of 50-60% of total global advanced-node supply and up to 92% of the very highest-end (≤5nm) capacity. Apple, Nvidia, AMD, Qualcomm, Broadcom and most other major fabless chip designers remain 80-100% dependent on TSMC for their flagship products. No other foundry can absorb that volume on short notice.
Markets currently assign low probability to this scenario happening between 2026 and 2029, pricing TSMC (and its customers) as perpetual-growth stories. Any upward repricing of this tail risk creates massive asymmetry: TSMC and its customers fall sharply, while the only large, listed, non-Taiwan advanced foundry Intel ($INTC) becomes the direct beneficiary of forced diversification and emergency orders.
Risk Management Imperative
In semiconductors, risk management demands interim mechanisms. US Department of War views Taiwan as a Tier-1 threat. Tesla exemplifies this. Its AI revolution (Robotaxis, Optimus bots, Dojo supercomputers) requires billions of chips. Facing TSMC/Samsung bottlenecks, Tesla eyes an in-house “Tera Fab” by 2030, potentially partnering with Intel for US-based production to mitigate geopolitical risks.
Musk hints at Intel collaboration for co-building fabs, leveraging Intel’s domestic sites (e.g., Ohio), CHIPS Act funding, and tech like EMIB/Foveros for efficient chiplets. This aids Tesla’s AI5/AI6 ramps and secures Intel’s foundry revival with massive orders.
Bull Case for Intel:
We expect a wave of major foundry deals in the coming quarters:
Apple: Strong rumors of a multi-year contract to produce entry-level M-series chips (MacBook Air, iPad Pro) starting mid-2027; seen as the biggest validation yet.
AMD: Active talks for Intel to manufacture portions of AMD’s chips, helping AMD meet huge AI demand and diversify away from TSMC.
Broadcom: Already testing 18A; potential orders for networking/AI chips and advanced packaging.
Others: Microsoft confirmed for custom silicon; Qualcomm exploring packaging; more undisclosed customers widely expected.
Bear Case for Intel
Execution risks: 18A must succeed; history of delays.
Financial strain: Negative FCF (~$13-14B), suspended dividend.
Competition: TSMC leads nodes; Nvidia/AMD dominate AI/CPU.
Bottom Line
Intel offers a strategic hedge against Taiwan risks. Its US-centric operations and aggressive foundry push position it for major gains amid TSMC vulnerabilities, especially via deepening Tesla ties and the growing market expectation that multiple large 18A customer deals (Apple, Broadcom, AMD, and others) we expect to be announced in the coming quarters.