What's happening
Taiwan Semiconductor Manufacturing Company shares dropped 2.4% to NT$2,235 on May 12 as investors reacted to weekend reports of a preliminary chip manufacturing deal between Apple and Intel. The Wall Street Journal reported that the two companies, after talks spanning over a year with formal negotiations in recent months, have agreed for Intel to produce chips for Apple devices. The Trump administration actively encouraged the partnership, with President Trump advocating directly to Apple CEO Tim Cook and Commerce Secretary Howard Lutnick meeting repeatedly with Cook, Elon Musk, and Jensen Huang to promote Intel collaboration.
Intel shares had surged 15% on May 8 when the deal was first reported, contributing to the company's more than 200% year-to-date gain. Apple shares rose 1.7% in afternoon trading the same day. The U.S. government became Intel's largest shareholder last year under CEO Lip-Bu Tan, with one administration official stating they have been trying to drum up business for Intel.
Why it matters for markets
The market reaction reflects concerns about potential supply chain diversification away from TSMC, which accounts for more than 40% of Taiwan's total market value at NT$2.10 trillion. However, TSMC shares had surged 31.25% since March 31 prior to this decline, driven by strong AI chip demand. Alex Huang from Mega International Investment Services characterized the selling as a knee-jerk reaction, noting the losses were minor compared with TSMC's previous gains.
For Intel, the potential Apple partnership represents a significant validation of its foundry revival strategy, with the stock reaching a 52-week high of $132.75 and current market capitalization of $650.57 billion. Apple CEO Tim Cook recently cited supply constraints at contract manufacturers during an earnings call, suggesting the company's motivation to diversify beyond TSMC's capacity limitations. The deal could provide Intel's foundry business with a marquee customer while offering Apple supply chain resilience amid AI-driven capacity strains at TSMC.
Sectors and assets to watch
The semiconductor foundry sector faces a potential reshuffling as Apple explores alternatives to TSMC's dominant position in advanced chip manufacturing. TSMC currently serves major clients including Apple, Nvidia, AMD, and Qualcomm with leading-edge process nodes from 3nm to 28nm. Intel's foundry services business could benefit significantly from landing Apple as a customer, potentially competing more directly with TSMC's $4.10 trillion in revenue.
Broader implications extend to the AI chip supply chain, where capacity constraints at TSMC from Nvidia and other AI companies have created bottlenecks. Companies dependent on TSMC's advanced manufacturing capabilities may need to evaluate alternative foundry options as demand continues to outpace supply in the AI semiconductor market.
What to watch next
Monitor formal announcement details of the Apple-Intel manufacturing agreement, including production timelines, chip types, and capacity allocations. Key developments include Intel's foundry capacity expansion plans, TSMC's response to potential market share shifts, and whether other major tech companies follow Apple's diversification strategy. Watch for any impact on TSMC's AI chip production commitments to Nvidia and other customers as supply chain dynamics evolve.