Report: Intel outsources chip manufacturing to TSMC

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Image: Intel

Trendforce recently reported that Intel has hired Taiwanese Semiconductor Manufacturing Corporation (TSMC) to manufacture its advanced central processing units (CPUs).

The research organization said TSMC will begin mass production of i3 CPUs with its 5nm node in the second half of 2021. She also mentioned that the foundry would begin mass producing Intel’s mid- and high-range CPUs with its 3nm nodes in the second half of 2022.

Intel has also outsourced the manufacture of 15 to 20 percent of its non-CPU products to TSMC and United Microelectronics Corporation (UMC).

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Why Intel may outsource chip production

Intel dominated the semiconductor sector for many years because of its world-class technology and robust manufacturing capacity. However, the company has struggled in recent years as manufacturing issues have delayed new product launches. The company has also faced competition from pure foundries that use knots that go beyond the complexity of their processes.

Intel’s problems have worsened recently. Rival Advanced Micro Devices (AMD) has targeted consumer and data center market share. In addition, the former client Apple developed its own CPUs instead of using third-party hardware.

Earlier this month, it was reported that Intel has started outsourcing negotiations with TSMC and Samsung. Since both companies have successfully developed 5nm nodes, they could offer Intel generations of manufacturing technology improvements. However, the Taiwanese manufacturer likely won Intel’s business because it had space to manufacture the American company’s products.

Intel likely didn’t hire UMC to make its CPUs because its nodes aren’t as advanced as its contemporaries. However, the company could use its 12nm capacity to make other offerings such as the Optane branded 3D Xpoint memory modules.

Move in the right direction

Trendforce offered a forecast for the future of Intel based on the decision to start outsourcing some semiconductor production.

The research organization assumes that the chip maker will continue to operate as an integrated design maker (IDM), but with a narrower focus. The company believes that going forward, Intel can redirect its capital to advanced research and development. It is expected that the company will continue to manufacture some of its most profitable components in-house.

TrendForce believes Intel can optimize its manufacturing efforts by leveraging TSMC’s next generation packaging services. It is also believed that by outsourcing some manufacturing work, Intel will become more competitive against fabless rivals like AMD.

Intel recently announced that Pat Gelsinger, CEO of VMware, will become CEO in mid-February. Unlike his predecessor, Bob Swan, Gelsinger has a long history in the technology industry. His previous accomplishments included decades of work for his next employer, including developing the Intel 80486 microprocessor. Based on his experience, the manager is exactly the person that the chip manufacturer needs in the big chair.

Given the structural and leadership changes, Trendforce’s forecasts for Intel will likely be implemented. The company had to mess things up on a systemic level to get back on track. With that apparently done, it appears poised to regain its market leadership position.