TAIPEI (Taiwan News) — Baird Senior Research Analyst Tristan Gerra said Wednesday there are market rumors that Washington is urging Intel and TSMC to form a joint venture.

According to the proposal, US government officials want Intel to put its existing and under-construction 3 nm and 2 nm chip fab projects into the joint venture, per CNA. Generally, the smaller the manufacturing process, the more powerful the chip.

Sources explained that TSMC would provide semiconductor engineers and technical expertise to produce advanced chips in the US. This would ensure a stable domestic chip supply while receiving federal subsidies from the Chips and Science Act.

Since Intel’s chipmaking division, Intel Foundry, has been operating separately from its other divisions. The market has long anticipated that it might spin off its foundry operations, per CNA.

Gerra said he believes the rumor is plausible, as the deal could provide Intel with significant cash flow relief, allowing it to focus on design and platform solutions. Additionally, a successful foundry venture could attract key fabless companies looking for manufacturing alternatives.

Neither Intel nor TSMC has confirmed or denied the reports.