- Taiwan Semiconductor shares continued their fall from February record highs on Wednesday.
- The drop came after Intel announced plans to directly compete in the foundry business.
- Intel is building two chip factories in Arizona in order to compete with the semiconductor giant.
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Intel’s new CEO Pat Gelsinger laid down plans to directly compete with Taiwan Semiconductor and its South Korean rival Samsung in the foundry business creating chips for companies around the world.
“Intel is back. The old Intel is the new Intel,” Gelsinger said in a March 23 virtual presentation. “We’re going to be leaders in the market and we’re going to satisfy the new foundry customers, because the world needs more semiconductors and we’re going to step into that gap in a powerful and meaningful way.”
Intel is taking advantage of incentives from both federal and local governments to help roll out its new factories after President Biden signed an executive order to bolster US supply chains amid a worldwide semiconductor shortage in late February.
Intel’s Arizona factories will create over 3,000 permanent high-tech jobs, 3,000 construction jobs, and roughly 15,000 local long-term jobs for the region.
Taiwan Semiconductor shares continued their more than month-long fall on Wednesday after the Intel news broke. The stock is down roughly 20% from February 16 record highs.
In a note to institutional investors on Wednesday, Wedbush’s Brad Gastwirth said he believes TSMC’s fall on the Intel news is overdone.
The Chief Technology Strategist said he sees Intel’s new foundry business as an expensive move that could have an “elongated” production timeline, not producing any revenues for Intel until 2022 or 2023.
Taiwanese Economy Minster Wang Mei-hua added a similar opinion when leaving parliament on Wednesday, saying Intel’s $20 billion investment wouldn’t be a challenge to Taiwan Semiconductor and other Taiwanese chip makers, Reuters reported.
Taiwan Semiconductor has enough of its own problems without Intel’s move into the foundry business.
A water shortage has threatened production at TSMC for over a month now, and Bloomberg reported on Wednesday that the water supply to chip makers has been cut entirely as a drought continues to lower water reserves in the island nation.
Taiwan Semiconductor traded down 4.13% as of 9:58 a.m. ET on Wednesday.