By Max A. Cherney

(Reuters) -Intel said on Tuesday it has agreed to sell a stake of about 10% in the IMS Nanofabrication business to Taiwan Semiconductor Manufacturing Co.

The transaction values IMS at about $4.3 billion. Intel will retain majority ownership of IMS, and the transaction is expected to close in the fourth quarter.

"The investment by TSMC we believe also demonstrates the excitement across the whole semiconductor manufacturing ecosystem for the significant opportunity ahead of IMS," Intel vice president of corporate development Matt Poirier said.

Intel is building a contract manufacturing business called Intel Foundry Services that competes with TSMC. But TSMC has been a long-term partner of IMS since around 2011 or 2012, and relies on the company's technology, according to IMS CEO Elmar Platzgummer.

Intel sold a 20% stake in IMS earlier this year to Bain Capital at the same valuation.

Intel acquired IMS in 2015. The Austrian company makes a chip manufacturing component called a mask that is necessary for a next generation of lithography tools. So-called "high-NA" extreme ultraviolet equipment is necessary to continue to make faster chips.

"As the industry went to EUV there was only one technical solution left over to do the mask writing, and a mask is an essential component for chipmaking," Platzgummer said.

(Reporting by Yuvraj Malik in Bengaluru and Max A. Cherney in San Francisco; Editing by Shounak Dasgupta, Louise Heavens and David Evans)