Intel Corp. (INTC) has been testing chipmaking equipment from a supplier with some complicated baggage. The company evaluated tools this year from ACM Research Inc. (ACMR), a U.S.-based equipment maker that happens to have deep ties to China and two overseas units that Washington has already sanctioned.
Here's where things get interesting. The U.S. government barred two of ACM Research's units—one in Shanghai and another in South Korea—from receiving American technology. The reason? Alleged connections to China's military chip efforts. ACM Research disputes these claims.
What exactly was Intel testing? Wet etch tools, which are used to remove material from silicon wafers during chip production. These aren't just any tools, either. Intel was evaluating them for potential use in its 14A chip production process, one of its most advanced manufacturing techniques scheduled to launch in 2027, according to Reuters reporting Friday.
National Security Hawks Sound the Alarm
China hawks are raising concerns about Intel's decision to work with a supplier connected to sanctioned entities. The worries touch on several fronts: potential leakage of sensitive chipmaking expertise, weakening of Western supply chains, and the possibility of hostile interference in critical technology infrastructure.
These aren't abstract concerns in the current geopolitical climate. Intel, Advanced Micro Devices, Inc. (AMD), and Texas Instruments Inc. (TXN) are already facing multiple lawsuits in Texas state court accusing them of failing to prevent their chips from ending up in Russian weapons that killed and injured Ukrainian civilians. The companies have said they complied with sanctions.
ACM Research's Defense
ACM Research isn't staying quiet on this issue. The company confirmed that its U.S. team sold and delivered multiple tools from its Asian operations to domestic clients, including three shipments to a "major U.S.-based semiconductor manufacturer." Some of those tools met performance standards, according to the company.
More importantly, ACM Research maintains that its U.S. operations are isolated from its sanctioned Chinese units and that it has safeguards in place to protect customer trade secrets. Whether that explanation satisfies national security officials remains to be seen.
Intel's Broader Transformation
This equipment testing story unfolds against the backdrop of Intel's ambitious turnaround effort. The stock has gained over 97% year-to-date, driven by recovering PC sales, increased AI focus, U.S. government support, and major potential customer deals like Apple Inc. (AAPL).
In October, Intel CEO Lip-Bu Tan said he's refocusing the company on engineering excellence after years of complacency eroded its semiconductor leadership. That's a pretty candid admission from a CEO about his company's recent history.
Tan has shifted Intel's strategy toward artificial intelligence and its foundry business, where the company manufactures chips for other companies. That foundry business still trails Taiwan Semiconductor Manufacturing Company Ltd. (TSM), the industry leader, but Intel is making moves to catch up.
The company recently ditched sale talks and decided to reinvent its networking business as part of its AI strategy, signaling confidence in its ability to turn things around internally rather than divesting assets.
Intel shares were down 0.76% at $39.21 during premarket trading on Friday.
