Despite the overall downturn in the semiconductor sector, Intel (INTC) managed to emerge as the sole major U.S. chip maker experiencing growth. This exceptional performance can be attributed to several crucial factors.
Intel’s Rise Amidst a Sea of Decline
While the iShares Semiconductor ETF (SOXX), tracking the ICE Semiconductor Index, plummeted by 2.6%, Intel saw a noteworthy 2.8% increase, reaching $38.08 per share. Other chip-related stocks, such as Qualcomm (QCOM) and Applied Materials (AMAT), experienced even steeper drops, with declines of 6.7% and 3.6% respectively.
Rising Concerns Over U.S.-China Tensions
Investors in the semiconductor industry have grown increasingly anxious due to the escalating tensions between the United States and China. Recent reports indicate that Beijing has started prohibiting the use of Apple iPhones for government work. Such developments have further heightened apprehension among semiconductor investors.
Intel’s Unexpected Advantage in China
Surprisingly, Intel’s stock has been positively impacted by these latest developments. One might wonder why this is the case, given that Intel also heavily relies on sales in China. The answer lies in the fact that investors view Intel as a hedge against an all-out chip war between the United States and China.
The Intel Advantage
Under the leadership of CEO Pat Gelsinger, who joined the company two years ago, Intel has implemented an aggressive turnaround strategy. Gelsinger’s focus on expanding the company’s foundry business has proven to be a wise move. Mark Gardner, an executive at Intel, has highlighted the compelling advantages of the company’s foundry services, including a more secure supply chain and advanced chip packaging services.
Intel as an Alternative to Taiwanese Semiconductor Manufacturing
As geopolitical tensions rise in Asia, more companies are considering Intel as a domestic alternative to Taiwanese Semiconductor Manufacturing (TSM) for chip manufacturing. Intel is the only American chip maker with the necessary scale and capabilities to potentially compete with TSMC. While TSMC does have some chip factories in the United States, the majority of its capacity remains in Asia.
The Potential Benefits for Intel
The key takeaway from the intensifying chip war between the United States and China is that Intel stands to benefit. As tensions escalate, Intel’s unique position as a potential domestic alternative to TSMC positions it favorably in the semiconductor sector.