Intel In Talks With TSMC, Samsung To Outsource Production: Report

California-based Intel Corp INTC has reportedly been in talks with Taiwan Semiconductor Mfg. Co. Ltd. TSM and Samsung Electronics Co Ltd SSNLF to outsource partial chip production after delays in its chip fabrication processes, Bloomberg reports.

What Happened: Intel had reported problems with its 7-nanometer chip manufacturing process in July 2020 and announced a delay in the rollout of its next-generation chips to 2022, 2023. The company had said it was considering outsourcing some of its chip manufacturing.

Intel’s CEO Bob Swan has promised investors that he would set out outsourcing plans by Jan. 21, when it reports earnings. Swan said he would get the company’s production technology back on track.

Though Intel is the world’s best-known chipmaker, it has suffered years-long delays that have put it behind competitors that design their own chips and outsource production to companies like Taiwan Semiconductor.

Why It Matters: Rivals such as Advanced Micro Devices Inc. AMD and Apple Inc. AAPL have raced ahead with their own designs and TSMC’s advanced production technology, Bloomberg notes.

“We have another great lineup of products in 2022, and I’m increasingly confident in the leadership our 2023 products will deliver on either Intel 7-nanometer or external foundry processes, or a combination of both,” Swan said in October 2020. 

TSMC is the largest maker of semiconductors for other companies. It has offered to prepare Intel chips manufactured using a 4-nanometer process, with initial testing using an older 5-nanometer process, Bloomberg said, citing people familiar with the matter.

TSMC will make 4-nanometer chips test production by the fourth quarter of 2021 and volume shipments by next year. 

As Intel keeps manufacturing its best semiconductors in-house, any outsourcing of this scale will require a potential supplier to create new capacity.

Samsung is the world’s biggest producer of memory chips and a competitor to TSMC. It has to look for big contracts for its foundry unit, the Financial Times reports.

Bernstein analysts estimated Intel might outsource 10-30% of its CPU production in 2023 to TSMC, which would boost the latter’s revenue by 5% to 10%. “Samsung may get a minor share in this business,” but TSMC technology is ahead of Samsung’s “with better execution,” the Bernstein analysts said. 

Price Action: On the last check Monday, INTC shares are up 0.90% at $52.11, TSM shares are up by 3.09% at $122.36.

Posted In: NewsTechMediaSemiconductor- Memory Chips Industry
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