Intel’s dramatic fall from semiconductor supremacy poses a critical threat to US AI chip manufacturing capabilities, as the company that once dominated chipmaking now struggles to compete with Taiwan’s TSMC. Intel’s market value has plummeted to under $100 billion, while TSMC has soared to nearly $1 trillion, reflecting a seismic shift in the semiconductor industry driven by the AI boom. The company recently lost its 25-year position in the Dow Jones Industrial Average to Nvidia, underscoring the transformation.
The geopolitical implications are severe: Most leading US tech companies—including Nvidia, Qualcomm, AMD, and Apple—design chips domestically but rely on TSMC in Taiwan for manufacturing. This dependency creates vulnerability if China were to invade or control Taiwan, potentially stalling AI progress and crippling the modern economy. As the article notes, “real countries have fabs” has become the new imperative, as semiconductor manufacturing capability is now a matter of national security.
Recent reports indicate Qualcomm approached Intel about a potential acquisition, though analysts call the pairing “odd” since Qualcomm likely wants Intel’s chip-design operations rather than its struggling manufacturing business. Intel operates two main divisions: chip design for PCs, data centers, and other uses, and the manufacturing foundries that produce these designs. For decades, this integrated approach worked brilliantly, but Intel’s missteps—particularly missing the iPhone chip opportunity—allowed TSMC to build superior manufacturing expertise through diverse, high-volume production runs.
The AI era has intensified Intel’s challenges. Nvidia dominates AI chip design, and TSMC manufactures its GPUs. Intel has even begun paying TSMC to make some of its own chips. To reverse course, Intel recently separated its Foundry business from chip design, making it easier for outside customers to trust Intel without fearing competition. The company’s 18A process node represents a critical technological bet, with partnerships announced for manufacturing AI chips for Amazon Web Services and Microsoft.
Commerce Secretary Gina Raimondo has reportedly urged companies like Nvidia and Apple to recognize the economic benefits of using US foundries for AI chip production. The AWS deal is particularly significant as the cloud giant designs numerous chips for its massive data centers—exactly the high-volume manufacturing Intel needs to improve. However, analyst Stacy Rasgon warns that “18A had better be spectacular as they are betting the company on its success.” Breaking up Intel remains problematic because the Foundry business currently depends on volume from Intel’s own chip designs and “cannot stand on its own right now given heavy losses and lack of scale.”
Key Quotes
Real men have fabs
AMD cofounder Jerry Sanders made this comment in the late 1980s, which the article updates to ‘real countries have fabs’ to reflect how semiconductor manufacturing has become a matter of national security and economic sovereignty in the AI era.
18A had better be spectacular as they are betting the company on its success
Bernstein chip analyst Stacy Rasgon emphasized the critical importance of Intel’s new 18A process node technology, which represents the company’s best hope for competing with TSMC in manufacturing AI chips and other advanced semiconductors.
The manufacturing arm cannot stand on its own right now given heavy losses and lack of scale
Analyst Stacy Rasgon explained why splitting Intel into separate companies wouldn’t work currently, as the Foundry business depends on volume from Intel’s own chip designs to maintain operations and improve manufacturing processes.
Commerce Secretary Gina Raimondo has been trying to urge shareholders in companies such as Nvidia and Apple to recognize the economic benefits of having a US foundry that can produce AI chips
This quote from CNBC’s reporting reveals the US government’s active role in trying to rebuild domestic semiconductor manufacturing capability, specifically targeting AI chip production as a strategic priority.
Our Take
Intel’s predicament reveals a fundamental tension in the AI era: design excellence means nothing without manufacturing capability. The US has brilliant chip designers at Nvidia, AMD, Qualcomm, and Apple, but they’re all dependent on Taiwan for production. This is the Achilles’ heel of American AI dominance. The AWS partnership represents a lifeline, but Intel faces a brutal catch-22—it needs high-volume customers to improve manufacturing, but customers won’t commit without proven manufacturing excellence. The 18A technology is genuinely make-or-break. If it succeeds, Intel could become the domestic foundry the US desperately needs for AI chip production. If it fails, America’s AI ambitions may remain perpetually vulnerable to geopolitical risk. The Qualcomm acquisition rumors, while generating headlines, miss the point entirely—buying Intel’s design business doesn’t solve the manufacturing crisis. What matters is whether Intel’s fabs can become competitive again, and that outcome will shape the future geography of AI development for decades.
Why This Matters
This story is critically important for the AI industry’s future and US technological sovereignty. The semiconductor manufacturing crisis directly threatens America’s ability to maintain leadership in artificial intelligence, as AI chips require cutting-edge manufacturing capabilities that currently exist primarily in Taiwan. If geopolitical tensions escalate, US companies like Nvidia, which dominates AI computing, could lose access to the advanced manufacturing needed to produce the GPUs powering AI breakthroughs.
The implications extend beyond national security to AI development velocity itself. TSMC’s manufacturing excellence enables the rapid iteration and scaling of AI chips that have driven recent advances in large language models, computer vision, and other AI applications. Without domestic manufacturing capability, the US risks falling behind in the global AI race, as chip production bottlenecks could slow innovation.
For businesses, this represents a supply chain vulnerability that could disrupt AI deployment across industries. The AWS partnership with Intel signals that major cloud providers recognize this risk and are diversifying manufacturing sources. The outcome of Intel’s 18A technology bet will determine whether the US can reclaim semiconductor manufacturing leadership in the AI era, or whether American AI companies will remain dependent on overseas production for the foreseeable future.
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Source: https://www.businessinsider.com/intel-qualcomm-odd-couple-wont-solve-us-chipmaking-woes-2024-9