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Summary
Apple’s reported preliminary chip deal with Intel reflects a deeper shift in the semiconductor industry, where AI demand, supply-chain resilience and geopolitics are reshaping old alliances.
Intel has reportedly signed a preliminary deal with Apple to make some chips for its devices through its contract manufacturing business. While the details are not clear yet, it reflects how the semiconductor industry is evolving, driven by both commercial and geopolitical interests.
The deal is expected to benefit both companies. The partnership offers a validation to Intel's foundry business, a key pillar of its turnaround strategy. At the same time, it helps Apple diversify its supply chain, increasingly strained by demand from AI chipmakers such as Nvidia. The agreement, in which the US government reportedly played a significant role, also highlights how deeply geopolitics is becoming intertwined with the global chips business.
Foundry validation
Intel’s deal with Apple could help the American chipmaker regain its standing in the sector. For many years, Intel was an industry leader, with its processors powering millions of personal computers. However, by the mid-to-late 2010s, it had fallen behind Taiwan Semiconductor Manufacturing Company (TSMC). TSMC’s factories now produce some of the world’s most advanced chips for companies Nvidia and AMD, as well as Apple. Intel itself outsources production of some of its key products to TSMC.
Under former chief executive Pat Gelsinger, Intel responded with its “IDM (Integrated Device Manufacturing) 2.0" strategy, setting up new fabrication plants and launching Intel Foundry Services to compete with TSMC. The turnaround effort, now led by current chief executive Lip-Bu Tan, has been costly and uneven. Its foundry business has faced delays, yield issues and financial losses.
The deal with Apple could change that. Apple is among the industry’s most demanding chip buyers, with exacting standards and tough deadlines. Securing Apple as a customer could rebuild Intel’s credibility as a chip manufacturer and pave the way for more customers. Investors have been warming up to Intel in recent months, with its stock price doubling since April. The reports of the Apple deal on 8 May led to a further rise.
A full circle
The deal also represents a key phase in Intel’s long relationship with Apple. During the 1980s and 1990s, Intel was on the opposing side of Apple. It anchored the Wintel ecosystem (with Microsoft Windows as the operating system and Intel supplying the key hardware). Apple positioned itself as an alternative, relying on PowerPC chips developed with IBM and Motorola. That changed in 2005, when Steve Jobs announced Apple would shift Macs to Intel processors. He said Intel’s manufacturing roadmap was better aligned with Apple’s needs, particularly in performance, heat management and power efficiency.
In the mobile era, Intel missed the smartphone wave while Apple built in-house chip design expertise using Arm-based architectures. By 2020, Apple had designed its own processors for Macs and relied on TSMC to manufacture them. Apple has announced that the upcoming macOS release expected in September will drop support for Intel-based Macs. Intel’s revenues have been steadily shrinking since 2021 as the company missed on AI-boom opportunities. The current deal marks a fresh beginning for Intel. While it will not be supplying its own chips for Apple devices, it will manufacture Apple-designed chips.
Capacity crunch
For Apple, the logic is different. The company remains deeply dependent on TSMC for manufacturing nearly all of its custom-designed chips. It also had leverage on the company. Every time TSMC developed a new, more advanced chip-making process, Apple was typically the first major customer, sometimes buying up nearly all of the initial production.
In the past few years however, there is a growing demand for TSMC's capacity from AI chipmakers such as Nvidia and AMD. AI chips also occupy far more physical space on silicon wafers and generate higher profit margins than traditional consumer electronics chips. As a result, Apple, despite selling millions of devices each year, is losing its historical leverage over TSMC's advanced manufacturing capacity, and has started facing shortages.
In the recent quarters, it acknowledged supply bottlenecks. In his January analyst call, Apple CEO Tim Cook said shortage of advanced chips had affected the company’s ability to fully meet demand for some products. He noted that Apple is “in supply chase mode to meet the very high levels of customer demand” and is “currently constrained” by advanced node availability.
The AI squeeze
The demand for AI chips is only expected to increase in the coming years. Hyperscaler-driven AI infrastructure spending has surged since 2023, with combined capital expenditure reaching hundreds of billions in 2025 and projected to climb further in 2026. NVIDIA dominates the AI accelerator market with over 80% share, its explosive data center growth enabling it to overtake Apple as TSMC’s largest customer in 2025.
At TSMC, Apple’s revenue share declined to around 17%, while NVIDIA’s rose to 19% for the full year 2025. The foundry’s HPC and AI segment now accounts for over 55% of revenue. Advanced nodes and CoWoS packaging remain severely constrained, with demand expected to exceed supply by 25-30% through 2026-2027 despite massive capex. Capex on chips and servers is projected to cross $483 billion by 2028, from an estimated $280 billion in 2025, per Morgan Stanley Research.
For Apple, which has secured a large part of TSMC’s newest production capacity for its M-series chips, this growing competition creates real pressure. The company has therefore accelerated diversification, including the preliminary manufacturing agreement with Intel and discussions with Samsung, to reduce reliance on TSMC amid capacity shortages.
Silicon sovereignty
Geopolitics is also a major driver. Reducing dependence on TSMC also means managing Taiwan-related risks, as tensions between the US and China continue to rise. The deal with Intel promises Apple greater flexibility amid this geopolitical uncertainty.
The deal also highlights how deeply governments are now shaping the semiconductor industry. According to reports, federal officials actively encouraged the partnership, leveraging the influence they gained after the US traded nearly US$9 billion in grants for a 10% ownership stake in Intel last year.
This highlights a broader change. For decades, the US led the world in technology driven by private sector innovation and globalised supply chains. US headquartered companies dominate the semiconductor market, but get them manufactured mostly in Asia. Now, its government wants more advanced chip production to move back into the country. Intel remains central to that ambition because it is the only major US-headquartered company attempting to compete with Asian foundries at the leading edge of manufacturing.
However, manufacturing advanced chips is difficult and expensive. Analysts estimate Intel’s production costs remain significantly above TSMC’s, partly because Intel’s manufacturing yields are lower. The larger question is whether Intel can turn renewed attention into a sustainable manufacturing comeback.
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