Bank of America: If Qualcomm acquires Intel, Taiwan Semiconductor faces both opportunities and challenges
Bank of America pointed out that with the acquisition dynamics of Qualcomm and Intel, Taiwan Semiconductor faces opportunities and challenges. Qualcomm is one of Taiwan Semiconductor's major customers, and the proportion of Intel outsourcing to Taiwan Semiconductor may change due to the acquisition. If Qualcomm sells its wafer foundry services, it may accelerate Intel's outsourcing process, benefiting Taiwan Semiconductor. At the same time, MediaTek may benefit from Taiwan Semiconductor's technological advantages
According to the Zhitong Finance APP, Bank of America stated that with the ongoing developments in the acquisition dynamics of Qualcomm (QCOM.US) and Intel (INTC.US), Taiwan Semiconductor (TSMC.US) also faces potential opportunities and risks.
Earlier reports indicated that Qualcomm recently contacted Intel regarding an acquisition, but some analysts believe that this transaction may be difficult to achieve. Additionally, it has been reported that Apollo Global Management has proposed a $5 billion investment in the struggling chip manufacturer Intel.
Analysts led by Brad Lin stated that Qualcomm is one of TSMC's top five customers, contributing revenue between 5-9%. Currently, Intel outsources about 30% of its wafer production to TSMC (contributing 5-9% of TSMC's revenue) and plans to reduce this proportion to 20%.
If Intel's Intel Foundry Services (IFS) receives sufficient support from this transaction and executes well in product development, it may slow down the pace of outsourcing to TSMC. A key factor to watch is how Qualcomm would utilize IFS if it chooses to sell it or integrate it into its own business. However, analysts believe that if Qualcomm chooses to sell, Intel may accelerate the outsourcing process, benefiting TSMC.
Lin and his team also mentioned that MediaTek, a semiconductor company based in Taiwan, may benefit from this potential deal due to the usual execution risks associated with foundries.
The analysts added that the Snapdragon 888 launched by Qualcomm in collaboration with Samsung Foundry faces significant performance challenges, leading to MediaTek (along with TSMC) gaining market share in the high-end smartphone System on Chip (SoC) segment.
Analysts pointed out that TSMC's technological leadership and excellent execution may continue to provide MediaTek with a competitive advantage in chip performance. If the situation changes after the transaction, benefiting from TSMC's outstanding performance in foundry services, MediaTek could further enhance its industry position.
Furthermore, Lin and his team stated that Qualcomm has been a major customer of TSMC, particularly at TSMC's leading nodes. A potential acquisition of Intel may allow Qualcomm to expand into the x86 and High-Performance Computing (HPC) markets.
However, analysts noted that Qualcomm's existing relationships with TSMC and other foundries on different (ARM) architectures may complicate integration with Intel, which is primarily based on x86 wafers.
This potential transaction also faces risks, including regulatory challenges that may delay or prevent the acquisition. Analysts added that these factors, combined with Intel's weakened financial condition, bring uncertainty to the entire semiconductor market.
Wall Street analysts have an overall positive average rating for the stock, recommending a strong buy