White House may give Intel a huge gift

Lip-Bu Tan was appointed Intel CEO in March and given the difficult task of saving the company. He's been working on it and doing everything possible to fix the situation.

He trimmed the workforce and laid out a plan for the company to end the year with only 75,000 employees.

Tan also secured many investments, beginning with SoftBank's $2 billion stake. The US Government plans to speed up the payment of $8.9 billion in funding already pledged to the company, and Nvidia will invest $5 billion.

However, these investments arguably aren't enough, because the company faces one major problem.

Intel desperately needs customers for its foundries

According to the Bloomberg sources, Intel  (INTC) is in talks with Apple. The company is trying to secure an investment from Apple and is discussing how it can work more closely together.

Assuming Bloomberg sources are correct, and knowing that Apple no longer relies on Intel for its CPUs, this working closely together undoubtedly refers to Intel trying to get Apple to use its foundries to produce chips instead of Taiwan Semiconductor Manufacturing Company (TSMC).

This brings us to the crux of the matter: Intel's foundries. 

Its fabs are bleeding money, losing more than $13 billion in the last four quarters alone, and Intel is desperate to find customers.

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Operating semiconductor factories is very expensive. Research and development for better manufacturing processes costs billions. A semiconductor manufacturing process is usually referred to as a node. When a company develops a new "node," it usually needs additional work before it can be used with good yields.

Intel currently manufactures silicon for its Core 200-series Arrow Lake and Lunar Lake CPUs at TSMC. The company plans to make its Core 300-series Panther Lake line in its own fabs using its 18A node, reported Tom’s Hardware

Intel ran into issues with its 18A node yields due to performance-related changes made to Panther Lake CPUs.

According to Tom's Hardware, Intel CFO David Zinsner said regarding 18A yields:

We would have liked to have gotten yield stabilized sooner, but as we were adjusting performance, yield tends to be what gets impacted. We are in a good — really good place on the performance, and now we are making kind of steady incremental improvement on yields on 18A. And we'll take those learnings to help us on 14A.

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Following Panther Lake, Intel is supposed to launch the Nova Lake line of CPUs, but it is rumored that it may have to use TSMC's N2 node instead of its own 18A.

The combination of rumors and admitted difficulties in launching Panther Lake can't be good for attracting customers. Worse, Intel may end up pausing or discontinuing its 14A node if it doesn't secure a significant external customer, as stated in its 10-Q filing with the SEC.

US Government regulation may help Intel

According to the Wall Street Journal sources, the US government is considering a plan to cut down the US's reliance on semiconductors made abroad, hoping to increase domestic manufacturing.

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The new policy would require semiconductor companies to manufacture the same number of chips in the US as their customers import from overseas producers. Companies would need to sustain a 1:1 ratio over time to avoid paying an approximately 100% tariff.

On the surface, this could attract fabless semiconductor companies to Intel for manufacturing. Intel's shares closed 4.44% higher following the news of the rumored plan.

However, changing nodes is not a cakewalk. As we've seen with Panther Lake, even tweaks on a chip designed for a specific node aren't easy, let alone switching from one manufacturer's node to a different one. It can take a long time to redesign the chip.

Furthermore, TSMC has fabs in Arizona. For Intel, everything hinges on the success of Panther and Nova Lake lines. If they get good yields and performance, they will have a much easier time convincing other companies that they have a good node.

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