Intel Corp (INTC.O)_ Stock Up 24% On Reports of TSMC Tie Up. A Few Reasons Why It Likely Won’t Work. Intel Should Give Up Merchant Foundry.

Summary of Intel Corp (INTC.O) Conference Call Company Overview - Company: Intel Corp (INTC.O) - Industry: Semiconductor, specializing in microprocessors - Market Position: 1 supplier of microprocessors for desktop PCs, notebook PCs, and servers with approximately 70-80% market share - Revenue Sources: Approximately 80% of total revenue and 90% of total profits from PC and Datacenter segments - Employee Count: Roughly 105,000 employees worldwide - Manufacturing Facilities: Front-end wafer fabrication in multiple locations including Oregon, Arizona, New Mexico, China, Ireland, and Israel; back-end assembly in Malaysia, China, Costa Rica, and Vietnam [20][21] Key Points from the Conference Call - Stock Performance: Intel's stock increased by 24% following reports of potential collaboration with TSMC [1][12] - Joint Venture Speculation: Reports suggest Intel is in talks with TSMC for a joint venture where TSMC would assist Intel's merchant foundry business with technical expertise and manufacturing capabilities [1][2][12] - Government Involvement: The U.S. government is expected to provide funding to support this potential collaboration [1][12] - Skepticism on Success: Analysts express doubt about the success of this arrangement due to several factors: - Intel employees would need to adapt to TSMC's processes and methodologies, which are fundamentally different [3][14] - Intel workers may have to adopt new working conditions similar to those in Taiwan, including living near factories and being on-call [4][15] - Recommendation to Exit Foundry Business: Analysts believe Intel should exit the merchant foundry business to focus on its core microprocessor competencies, which would better serve shareholders [5][16] - Earnings Per Share (EPS) Estimates: - 2024A: -$0.93 - 2025E: $0.26 - 2026E: $1.59 - 2027E: $2.28 [6][22] - Current Rating: Analysts maintain a Neutral rating on Intel with a target price of $21.00, reflecting a potential downside of 6.6% from the current price of $22.48 [8][11] Risks Identified - Market Dependency: Intel's revenue is heavily reliant on the PC and server segments, which are sensitive to IT spending fluctuations [23] - Competition: Direct competition with AMD in the microprocessor market poses risks to market share and revenue [24] - Customer Concentration: The top three PC OEM customers account for approximately 46% of Intel's revenue, making it vulnerable to order declines [24] - Macroeconomic Factors: Intel's global operations expose it to risks from economic downturns or upturns in various regions [25] Conclusion The conference call highlights Intel's current challenges and opportunities, particularly regarding its potential collaboration with TSMC. Analysts remain cautious about the feasibility of this partnership and recommend a strategic shift away from the foundry business to enhance shareholder value. The company's heavy reliance on the PC market and competitive pressures from AMD are significant risks that could impact future performance.