The cutting edge outlook: A deep dive on Intel

This report will focus on Intel’s strategic position within the US and how the company may benefit from the Trump administration. In this report, we will look at Intel’s recent leadership issues, which have aided to the company’s recent woes, whilst also diving into the significance of the Trump administration for the company. Moreover, we dive into the supply chain logistics of Intel and its competitors and how we believe Intel is best poised amongst them. Lastly, we discuss whether Intel should stick to its guns and end our report with a summary of the aforementioned arguments.

Intel’s leadership issues

At the time of this article, Intel has announced a new permanent CEO to replace Patrick Gelsinger who stepped down in December 2024. As a reminder,Pat Gelsinger spent the first 30 years of his career at Intel and returned in 2021 at the request of the company. In 2022 Pat Gelsinger stated that “We're rebuilding that Grovian execution, as we call it, bringing back that heart of Andy Grove, the confidence, the engineering centricity, the discipline, the competitive spirit”. Moreover, the CEO back then stated that Intel’s plan was to “be one of the largest foundries in the world”, which could now aid the company years later for reasons we will explain later on this report. Continuing on with the theme of this section, Intel appeared to have a vision for the future. However, in 2024 the CEO stepped down as the company failed to capitalize on the recent AI boom which saw its competitors such as NVIDIA and AMD take charge and leave Intel behind. In addition, Intel’s head of data-center and artificial intelligence operations is leaving the group to join as the head of European telecommunications-gear for Nokia. In terms of a market response, participants appear to have reacted favourably to the departure of the two high-level executives, as they may have been perceived as part of the issue at the troubled chipmaker. In our view, the leadership shuffle in Intel provides the company with an opportunity to shed off aspects of its past and thus with the proper leadership, Intel could stay on the path to recovering some of its market share and potentially moving closer to competing on equal terms with its competitors.Specifically, in our view, we believe that Intel could greatly benefit from a fresh leadership structure which is able to pave the way forward for the company. That scenario appears to be moving forward, with the appointment of Lip-Bu Tan as the company’s new CEO, with the company has said that he is “an accomplished technology leader with deep semiconductor industry experience”.

The Trump administration

The Trump Administration may have been a beacon of hope for Intel, with its made-in-America policy, Intel may be the greatest beneficiary of the administration's trade agenda. Specifically, we are referring to the implementation of tariffs on China and the possible 25% widespread tariff on semiconductor imports. Starting with China, it is no secret that Trump has a particular itch with America’s overreliance on China, as seen by his administration’s comments. Although we tend to agree in part with some of his claims, our focus is the significance of China in the semiconductor business. China is the largest, rare earth element refiner which are essential in semiconductor manufacturing, AI chips and high-performance computing. Thus, a retaliation from China to restrict RRE’s (raw earth exports) could significantly impact companies such as NVIDIA, AMD and TSMC which heavily rely on China’s refined materials, which in turn could weigh on their respective stock prices. As a result, the US appears to be preparing for this possibility with the announcement of the US CHIPS Act which encourages domestic rare earth refining and of whom Intel has been the greatest beneficiary with its domestic US fabs. Specifically, Intel has received roughly $8 billion in direct funding from the CHIPS Act, placing them at a significant advantage over their competitors. Furthermore, aiding our hypothesis were the comments made by US Vice President Vance during his address at the AI summit in France, in which he stated that “To safeguard America's advantage, the Trump administration will ensure that the most powerful AI systems are built in the US with American designed and manufactured chips”. The comments by the VP appear to be a nod that the US will ‘defend’ Intel, as it is the only large-scale American company with cutting-edge foundries for computer chips. In turn the administration’s “protectiveness” combined with Intel’s status as a US company could prove very lucrative in the near future as its competitors could suddenly become its customers and thus it is our opinion that the company could benefit significantly from the self-reliance agenda which is being pushed by the Trump Administration.

Supply chain logistics and Intel’s position

For this segment, we are to begin by briefly describing the supply chain logistics of Intel and its competitors, namely AMD, NVIDIA, and TSMC. First off, AMD and NVIDIA which both rely on a Fabless model, meaning that the fabrication is not conducted in-house but is outsourced to companies such as TSMC and Samsung for their chip production, whereas TSMC and Intel have their own Fabs in the US and could thus minimize their reliance on China in the event of geopolitical tensions with Taiwan or a China-US trade war. In our view, the edge in this particular part goes to TSMC and Intel whose US-based fabricators provide them with an edge, and in particular Intel who may see NVIDIA and AMD becoming its customers.  Although it should be said that when compared to TSMC, Intel is lacking in leading-edge chips which are 3nm and 2nm at this point in time. However, Intel could catch up if it is successful with the production of its 18A node which is allegedly able to rival TSMC’s 2nm node. Moving on, in terms of  raw materials, Intel’s diversified procurement compared to its competitor's apparent overreliance on China, once again provides the company with an edge should China decide to restrict RRE’s which we have discussed in the above paragraph. Overall, in our view Intel’s vertical integration provides it with the unique ability to minimize its exposure to China in comparison to its competitors and thus could greatly benefit from it’s pre-existing US infrastructure. However, we don’t expect TSMC to give up its Crown without a fight, as seen by TSMC’s expansion into the US with its two Arizona fabricators and could thus increase competition for Intel.

Should Intel stick to its guns?

At the time of this report, there have been reports that “vultures” such as TSMC and Broadcom are circling around Intel, with rumours having circulated of a potential acquisition of Intel’s business from the aforementioned companies. We are not surprised that TSMC and Broadcom are interested in acquiring parts of Intel’s business considering Intel’s failures to capitalize on certain opportunities such as the AI boom and its diminishing market share. In turn, one could argue that selling part of its business may be a viable strategic option. On the other hand, as we have explained in the previous paragraph, Intel is poised to benefit from the Trump administration and its policies during his tenure, which begs the question as to whether or not Intel should weather the storm and hope that its fortune may change in the near term. In our opinion, the answer to this question is yes, Intel should stick to its guns and rather than sell-off parts of its business which provides it with a competitive edge in the future, it should instead focus on restructuring and reducing operating costsin order to increase their efficiency and profitability margins.

The conclusion

The next four years may be heavily lucrative for Intel, considering the administration's economic policies and ambitions. Specifically, the desire to retain America’s status as the leader in artificial intelligence and the desire to protect and strengthen American companies leads us to the conclusion that Intel is the best-poised chip manufacturing company that can benefit the most when compared to its competitors. However, for Intel to succeed there are a few key issues that the company must address, such as 1) Leadership, in our view the company’s newly appointed CEO may fit the bill as to what Intel needs at this point in time, yet it may be too soon to say for sure that he will succeed in turning Intel around, 2) The success of intel’s 18A process which allegedly can rival TSMC’s N2 process, 3) Support from the US Government which could lead to Intel’s competitors becoming it's customers. Overall, we see the case for Intel to emerge as a dominant player within the decade should it correctly position itself as the dominant player in the US by taking full advantage of its vertical supply chain integration and its status as a US company. With that in mind, Intel’s woes could become a distant memory of the past, yet the road will not be easy and will require hard work and difficult decisions to fully utilize the company’s resources and strengths. Failure to do so could lead to Intel becoming a relic of the past.