Intel CEO Lip-Bu Tan is set to meet with President Donald Trump on Monday, according toThe Wall Street Journal. There is a lot riding on the encounter, where not only the CEO’s personal future but that of Intel in the semiconductor industry could be at stake.
Trump previously called for Tan to resign, saying he was “highly conflicted,” following a letter sent by Republican Sen. Tom Cotton questioning Tan’s links to Chinese firms. Intel published a letter from Tan to its employees in which he said the company was engaging with the administration to address the matters raised.
Tan’s first job is to persuade Trump that he is the right man to lead Intel. His second job is to convince the president that Intel has a role in the White House’s aims for the semiconductor industry.
Intel has lost out in advanced chip manufacturing for external clients to Taiwan Semiconductor Manufacturing, or TSMC. In its recent earnings Intel signaled it wasn’t on track to win any major external business for its 18A manufacturing process any time soon, and warned it might “pause or discontinue” its next-generation 14A process if it can’t win a significant customer.
If Intel does scrap the 14A process, it would likely represent the end of any hopes of an American company being able to compete in advanced chip manufacturing with TSMC and South Korea’s Samsung Electronics. Taiwan’s TSMC would become the de facto dominant U.S. chip manufacturer as it pours $165 billion into its Arizona plants.
In such a scenario, Intel would be a much-diminished company, left with a chip-design arm that has missed out on the artificial-intelligence boom led by Nvidia and struggling to defend its PC and server market share from AMD and Arm Holdings.
On the other hand, if Tan can convince Trump the U.S. needs Intel as a domestic chip manufacturing champion, he’ll have an influential ally and argument to use with potential customers. The president has shown himself to be unusually willing to personally direct major companies such as Apple where they should invest.
Even if Trump can’t explicitly send customers Intel’s way, a White House endorsement would go a long way toward reassuring the market about the future of projects such as its $28 billion Ohio semiconductor project, which is heavily dependent on government funding.
Arguably it wouldn’t take much to boost Intel stock, with Wall Street nearly at peak pessimism—just two analysts have a Buy rating, according to FactSet. Intel’s chip-manufacturing business is currently booking billions of dollars worth of annual losses but the company expects it to reach break-even by 2027, based on hopes of 14A adoption.
As Barron’s has previously noted, the company trades close to its tangible book value—the same as would be expected in a liquidation scenario—due to its valuable semiconductor plants, although it looks more expensive on a price-to-earnings basis.
Intel stock was up 2.3% in premarket trading.
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