Intel Faces Potential Breakup as Broadcom, TSMC Weigh Bids Amid U.S. Security Concerns

Intel, the U.S. semiconductor giant once regarded as the backbone of American chip manufacturing, is now facing potential dismantling, as global rivals Taiwan Semiconductor Manufacturing Co. (TSMC) and Broadcom consider bids that could break the company into two distinct entities.

According to a report from The Wall Street Journal, the two industry heavyweights are separately exploring deals that could reshape the global semiconductor industry, with Broadcom interested in acquiring Intel’s chip design and marketing division, while TSMC has reportedly been examining the possibility of controlling some or all of Intel’s chip manufacturing plants.

These discussions, however, remain preliminary and largely informal, and neither company is currently working in collaboration with the other. Yet the very prospect of such deals has already triggered concerns within the U.S. government, which views Intel as a critical national security asset, particularly as the country races to reduce reliance on foreign semiconductor production.

The potential acquisition of Intel’s manufacturing facilities by TSMC, a Taiwan-based company, has raised serious national security concerns within Washington. A White House official, speaking to Reuters, indicated that while foreign investment in domestic manufacturing is generally encouraged, the Trump administration would likely oppose Intel’s U.S. factories being operated by a foreign entity.

“President Donald Trump’s administration may not support Intel’s U.S. chip factories being operated by a foreign entity,” a White House official told Reuters. While foreign investment in domestic manufacturing is encouraged, the White House prefers that Intel’s fabs remain under American control.

The concern stems from the strategic importance of chip manufacturing, especially at a time when the United States is actively working to onshore production and reduce dependence on Asia-based suppliers amid escalating geopolitical tensions with China.

However, despite U.S. efforts to strengthen Intel’s position, the company’s struggles in recent years have made it vulnerable to external acquisition efforts. Under the Biden administration’s push to revitalize domestic chip production, Intel was one of the largest beneficiaries of the $7.86 billion government subsidy intended to support American semiconductor manufacturing. The U.S. Commerce Department finalized this funding in November as part of its broader plan to ensure semiconductor supply chain resilience and reduce reliance on Asian chipmakers.

The idea of a foreign firm controlling Intel’s semiconductor plants presents a complex dilemma. On the one hand, TSMC is widely regarded as the world’s most advanced chip manufacturer, producing cutting-edge semiconductors for industry leaders like Nvidia, Apple, and AMD. On the other hand, handing over control of Intel’s production infrastructure to a non-U.S. entity would contradict Washington’s long-term goal of reinforcing domestic chipmaking capabilities.

The geopolitical implications of such a deal also cannot be ignored. With China repeatedly signaling its territorial ambitions over Taiwan, the United States has been working to secure its own chip manufacturing independence to avoid potential disruptions in the global supply chain. Any deal that sees TSMC taking control of Intel’s U.S. factories would inevitably invite scrutiny, not just from Washington but from international regulatory bodies as well.

What a Breakup Would Mean for Intel

Intel, historically one of the few companies in the world that both designs and manufactures its own semiconductors, has already been struggling to maintain its competitive edge against TSMC, Nvidia, and AMD. If the company were to be broken up, it would represent a fundamental shift in its business model, likely pushing Intel toward a fabless approach similar to Qualcomm and AMD, which design chips but rely on external manufacturers like TSMC for production.

Analysts note that the shift could have significant financial consequences. Intel’s business has traditionally thrived on its ability to control both design and manufacturing, allowing it to maintain gross margins well above 50%. Becoming a design-only company could cause a sharp decline in those margins, forcing Intel to compete directly with fabless chipmakers that have already cemented strong partnerships with TSMC and Samsung.

On the other hand, if Broadcom were to acquire Intel’s chip design and marketing division, it would mark a strategic expansion for the company beyond its traditional focus on networking and custom chips. Broadcom has reportedly been closely evaluating Intel’s design capabilities, but sources indicate that it would only move forward with a deal if it could find a partner for Intel’s manufacturing business—which could potentially mean collaboration with a U.S.-backed investor group rather than a foreign entity like TSMC.

The logistical hurdles of such a deal are also considerable. Intel’s manufacturing processes differ significantly from TSMC’s, meaning that if TSMC were to acquire Intel’s fabs, it would have to make significant operational adjustments. Additionally, running these facilities would require TSMC to share proprietary manufacturing processes with Intel employees, an issue that presents a serious competitive risk for the Taiwanese company. At the same time, Intel would have to relinquish control over its production technologies, a move that would redefine its role in the industry and potentially diminish its market influence.

Intel’s recent struggles have only added to the challenges. Former CEO Pat Gelsinger, who was ousted last year, had set sky-high expectations for the company’s AI and semiconductor manufacturing capabilities, but those ambitions ultimately fell short. The company lost or canceled several major contracts, leading to a 60% drop in its stock value in 2024 and a workforce reduction of approximately 15%. Now, with interim executive chairman Frank Yeary leading discussions with potential buyers, the company’s future direction remains uncertain.

Sources close to Yeary have indicated that his primary focus is on maximizing shareholder value, even if that means breaking up Intel as it currently exists. However, this approach is likely to face resistance from U.S. government officials who have made it clear that they see Intel as a strategic national asset.

A Battle for Control: Who Stands to Gain?

The potential dismantling of Intel is expected to have far-reaching consequences for the global semiconductor industry. If Broadcom successfully acquires Intel’s design division, it would gain a significant foothold in the high-performance computing and AI chip market, allowing it to compete more directly with Nvidia and AMD. Meanwhile, TSMC’s acquisition of Intel’s fabs would strengthen its global dominance, consolidating its position as the world’s most powerful semiconductor manufacturer.

However, regulatory scrutiny is inevitable, particularly from U.S. antitrust authorities. Intel remains a key player in the U.S. push for semiconductor self-sufficiency, and any deal that weakens its domestic manufacturing presence is likely to face intense political opposition.

However, the discussions surrounding Intel’s potential breakup reflect a larger shift in the semiconductor industry, where fabless chipmakers like Nvidia and AMD are thriving, while traditional integrated manufacturers like Intel are struggling to keep up. The industry has seen an increasing reliance on TSMC, a trend that has raised concerns about supply chain vulnerabilities in the event of geopolitical instability.