Semiconductor giant Intel (INTC +4.55%) has a new CEO ready to shake up the company after years of disappointing results. Intel has been losing market share to AMD in its core CPU businesses, struggling to gain a foothold in the AI accelerator market, and pouring billions into new factories and manufacturing technology. That heavy spending supports the company's effort to become a major foundry, making chips for others and competing directly with TSMC.
Intel is making progress on the foundry front. The Intel 18A manufacturing process, the capstone of its original "five nodes in four years" plan, is fully developed and now in limited production. The challenge for Lip-Bu Tan, Intel's new CEO, will be to scale up production while winning enough new clients to push the foundry toward eventual profitability.
NASDAQ: INTC
Key Data Points
Tariffs are a mixed bag for Intel
As of Tuesday, the sweeping global tariffs announced by President Donald Trump exclude semiconductors. TSMC is based in Taiwan, although it now has some manufacturing facilities in the U.S. Essentially every major chip designer, including AMD, Nvidia, Apple, and countless others, relies on TSMC to manufacture their cutting-edge chips.
The Trump administration has indicated that tariffs would eventually apply to semiconductors as well, although the timing and severity is up in the air. If this happens, an argument could be made that Intel's foundry could benefit as potential customers gain a stronger incentive to choose the Intel 18A process. However, there are some important caveats.
First, the tariffs already include semiconductor manufacturing equipment, which will make it more expensive for Intel to expand its U.S. manufacturing facilities. According to Intel, a typical semiconductor manufacturing facility requires around 1,200 multimillion-dollar tools. With U.S. tariffs set to hit nearly every country around the world, scaling up the Intel 18A process and bringing future processes to production is going to become even more capital intensive.
Second, tariffs could boost prices and reduce demand for PCs and servers. That would hit Intel's product business, which is already struggling to regain lost market share from AMD. PC sales are already sluggish following a pandemic-era boom, and the situation could get much worse if these tariffs trigger an economic slowdown.
Third, Intel itself is a significant customer of TSMC. The manufacturing of Intel's Lunar Lake and Arrow Lake PC chips is largely outsourced to TSMC, so a tariff on semiconductors from Taiwan would directly hit Intel's PC chip business. Panther Lake, Intel's next-generation laptop CPU, will switch to the Intel 18A process. However, Panther Lake won't arrive until the end of the year.
Intel's latest server CPUs use the Intel 3 process, but production of that process node is being shifted to Ireland from Oregon. Under the current tariff plan, the Republic of Ireland will be hit with a 20% tariff.
Tariffs aren't a reason to buy Intel stock
While there are a few reasons to bet on a comeback for Intel, particularly with a new CEO at the helm and the foundry business on the cusp of proving itself, tariffs likely aren't one of them. Intel may see some positives if tariffs are extended to include semiconductors from Taiwan, but there will be plenty of negatives as well. The potential for a drop in demand for PC and server CPUs could put significant pressure on Intel's finances, and its dependence on TSMC for some manufacturing leaves it exposed to higher costs.
Intel's shift to U.S.-based manufacturing for Panther Lake will reduce its dependence on TSMC, although it's impossible to tell whether tariffs will still be in place at the end of the year. If chip designers are assuming that tariffs will ultimately be a short-lived experiment, they may not jump at moving production from TSMC to Intel. There's a lot of uncertainty.
For Intel, tariffs look like a net negative, at least for now. Betting on a turnaround can still make sense, but tariffs seem likely to make Intel's comeback more difficult.
