So yesterday, we found out about the possibility of a new joint venture between chip stock Intel (INTC) and Taiwan Semiconductor (TSM), and analysts are starting to consider the notion. One of the big points seems to be that this is a huge win for Intel, and investors are starting to pile in. Intel shares are up nearly 10% in Thursday afternoon’s trading at the remarkable windfall this represents.
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Word from Liu Pei-chen with the Taiwan Industry Economics Database at the Taiwan Institute of Economic Research (TIER) notes that this move would be a big win for Intel. It would not, however, be much of a win for Taiwan Semiconductor. In fact, Liu notes, the move would actually be worse for Taiwan Semiconductor than semiconductor tariffs would be.
Such a move, Liu notes, could lead to “technology outflow,” and increase the potential for process leaks. If those leaks occurred, that in turn would make Taiwan Semiconductor’s lead in the market an endangered position. And the possibility of leaks would increase, Liu noted, especially given the priority that the United States government is putting on domestic chip production.
A Clear Focus
While Taiwan Semiconductor would gain some protection from costs as a result of the joint venture, Liu noted, the potential loss of its bargaining power as a result of its primacy in the sector would ultimately cost it more than the tariffs would. After all, Liu notes, those costs can just be passed on to American customers. Taiwan Semiconductor might also be able to benefit from CHIPS Act funding as well, reports note, thanks to the joint venture.
But if Intel can get its three nanometer and two nanometer processes up and running, that may actually hurt Taiwan Semiconductor’s ability to make sales as well. It does look, therefore, like the joint operation move might not be a good one for Taiwan Semiconductor.. That in turn puts it somewhat in jeopardy.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds and five Sells assigned in the past three months, as indicated by the graphic below. After a 43.49% loss in its share price over the past year, the average INTC price target of $21.98 per share implies 9.32% downside risk.
