Intel. What's Really Going On?

some of the rumours circulating are insane...

Debate about Intel’s future has reached fever pitch over the past week. Reports from usually reputable outlets indicate everything from Broadcom in a possible deal to acquire Intel’s Chip Design division (Bloomberg) to TSMC eyeing up Intel’s fabs (Wall Street Journal) alongside Broadcom’s alleged gambit:

One outlet has gone so far as to offer an extremely detailed roadmap of how a JV built around Intel Foundry might pan out over the coming decade, details here:

While this opinion piece has some elements with which we agree, we find TSMC’s supposed role in this JV being highly unlikely. Then there’s also the assertion that the US Hyperscalers would collaborate to an unprecedented degree in backing a newly spun out Intel Foundry JV type arrangement for as long as it takes to make it successful. Now why on earth would they be willing to do that?

Finally, the proposed JV roadmap contained in the article completely ignores two critical facts. Firstly, Intel no longer owns its flagship fabs outright. Remember those SCIP deals? Here’s our deep dive into the most recent one with Apollo:

Those SCIP deals are highly relevant to what’s currently rumoured to be going on with Intel. We flagged the problem they pose in this article we published after Mr. Gelsinger’s surprise departure some months ago:

However, the problem is that the things Mr. Gelsinger was doing cannot easily be undone. For example, the SCIP program concocted between him and the CFO David Zinsner has brought two outside investors into the fold, Brookfield & Apollo. They now have rights associated with the soon to be completed Arizona plants and Fab 34 in Leixlip, Ireland, respectively.

I’ve felt from the outset that these SCIP deals were a really bad idea and now this is proving to be the case. Apollo & Brookfield aren’t charities, they invested to make a return. That’s not happening and penalties are starting to kick in as we learn from the 2024 Annual Report

For example, in the fourth quarter of 2024, we recognized a $755 million charge related to penalties we expect to pay in connection with Ireland SCIP for construction delays we decided to make as we reduced our near-term capacity requirements. Further, both arrangements are expected to significantly and increasingly impact our net income (loss) attributable to Intel and earnings (loss) per share attributable to Intel in future periods as wafer production volumes increase at our expanded Arizona campus and at Fab 34 in Ireland.

Then there’s the problem created by the CHIPs Act funding, something we also highlighted in the previous article.

Equally, the recently announced CHIPs Act grants come with some very onerous terms and conditions that effectively gives the US DOC the right to weigh in on any decisions relating to changing the status/ownership of IFS.

Intel Foundry’s situation is highly complicated by these (and other) factors. So what’s really going on at Intel? Let’s dig in…