Reports Wednesday that Apple has held talks with Intel
about a possible strategic investment sent shockwaves through the stock
market. Intel shares shot up. Apple, the reports said, had begun the
talks—initiated by Intel—even before the Trump administration made its
controversial announcement that it would buy an $8.9 billion share in
the chipmaker. 

The government’s move had the effect of attracting more investment in
Intel, however. U.S.-based Nvidia said it would invest $5 billion and
Japan’s Softbank said it would invest $2 billion.

Intel is a special case. The storied U.S. chipmaker has fallen on
hard times after missing the chance to supply the chips of the mobile
revolution. Now it’s far behind in having the technology to design
and/or manufacture best-in-class chips that are good at training and
running AI models. 

The de facto alternative to a U.S. fabricator of AI chips, meanwhile,
is TSMC. At the moment, the AI Revolution depends on advanced chips
(most of them Nvidia designs) that are manufactured almost exclusively
by TSMC, which is based in Taiwan, a small island 81 miles from mainland
China, the U.S.’s fierce rival in AI global dominance. 

The U.S. is in a big hurry to find ways to de-risk that geopolitical
situation. Washington has worked with TSMC to build advanced fabrication
facilities on U.S. soil, and the company is now in the process of
spending $65 billion on building three giant factories in Arizona. 

But the chipmaker has found that setting up fabs in the U.S. is far slower than in Taiwan.
That’s thanks to a challenging regulatory and administrative
environment, a thorny struggle to acquire permits, and big cost
overruns. The company said in January that most of its chip
manufacturing would remain in Taiwan, especially for the most advanced
chips.

It’s one thing to work with TSMC to build fabrication facilities on
U.S. soil, but it’s even better to help a U.S. company become a viable
second-source option. And Intel, it seems, is America’s best hope for
that. But it will require lots of money and expertise. 

And the company with that expertise is TSMC. In January, Commerce
Secretary Howard Lutnick even approached TSMC to take over Intel’s chip
foundry (fabrication) business, which would be divorced from Intel’s
chip design business. Those overtures apparently didn’t bear fruit. 

Apple and Intel have a rocky history

With an Apple investment in Intel, it now seems more possible that
Apple (and Nvidia) would try to work closely with Intel to bring its
fabrication game up to speed. Both of those companies have lots of
expertise designing chips, and both have deep relationships with TSMC,
which fabricates the designs. 

Apple has a history with Intel. The company used Intel processors
inside its MacBooks from 2006 through 2020, but discontinued the
partnership after disappointment with the performance of the
processors. 

Apple also bought Intel modem chips for the iPhone for a time, but
again struggled to work with Intel to get the performance it wanted.
Apple bought Intel’s modem chip business in 2019, which gave it a foundation for designing its own modems. It put the first custom modem system-on-a-chip, called C1, into the iPhone 17 this year.

Apple and Intel have very different corporate cultures, and have
struggled to work well together in the past. During the work on the
Intel modem, Intel engineers said that Apple wanted first priority for
its projects, demanded to dictate all modem specifications, and insisted
on tight timelines with little tolerance for error. Apple found Intel’s
culture to be slower and less agile than its own. 

But a lot has happened at both companies since then. Markets have
changed. Intel is far weaker, and Apple is, arguably, somewhat slower in
its innovation. And the two companies would be working together for a
greater cause than just partnering on phone or laptop components. They’d
be central players in helping the U.S. keep pace with China in AI and
defusing a potentially dangerous geopolitical situation with regard to
TSMC.