Intel enlists TSMC to manufacture its next-generation CPUs in 2023

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Intel CEO Pat Gelsinger laid out a roadmap for the corporation to reestablish its primacy within the global semiconductor industry on Tuesday.

Its goals include expanding its manufacturing footprint, becoming a foundry provider, and increasing its use of third-party services. In particular, it tapped Taiwan Semiconductor Manufacturing Company (TSMC) to fabricate its next-generation client and server products in 2023.

However, the American firm’s long-term goals will put it in direct competition with its supply partner. Although Intel currently lacks TSMC’s advanced nodes, it is on track to catch up with the industry’s top contract chipmaker.

Intel to Outsource Core Chip Production

Intel is the world’s largest electronic components manufacturer, but it no longer has industry-leading fabrication technology. The firm encountered serious difficulties developing a 10nm manufacturing process that could yield large chip quantities at volume. While the company worked to resolve its production issues, TSMC and Samsung began offering 5nm foundry services.

On March 23, Intel revealed it contracted TSMC, Samsung, GlobalFoundries, and United Microelectronics (UMC) to make its merchandise. In the past, the integrated design manufacturer (IDM) outsourced the making of low-value products to all of the above-listed vendors. But it is wisely breaking with tradition in hiring the industry’s biggest pure-play foundry to make some of its core offerings.

Gelsinger did not get into specifics regarding the nodes involved in its TSMC collaboration. However, he said the firm would release self-made 7nm chips in tandem with its outsourced components. Tom’s Hardware posited that Intel could combine its architecture with TSMC’s advanced nodes to launch new high-performance center CPUs.

Regardless, the American vendor’s decision to outsource its semiconductor fabrication will make it a more competitive operator. Its most loyal customers will appreciate getting access to upgraded hardware instead of more delays.

The corporation’s moves to outsource its CPU production will also help finance its efforts to break into the pure-play foundry sector.

How Intel Can Become a Serious Foundry Services Player

When unveiling his company’s roadmap, Gelsinger said Intel wants to win the business of large clients like Qualcomm, Apple, Amazon, Microsoft, and Google. At present, its processing technology is not advanced enough to match their current fab partner TSMC. In fact, it probably will not be able to make a compelling pitch to those corporations for several years.

Nevertheless, Intel is on course to becoming a major player within the foundry services industry.

For one thing, the firm revealed it would work with IBM on its semiconductor research and development. Though it declined to offer details on the relationship, Gelsinger indicated that logic ICs and chip packaging would be areas of focus. Since both are U.S.-based companies, they meet Washington’s requirements for military suppliers.

Plus, Intel’s newly announced $20 billion component plants would give it the capacity to handle large U.S. Defense Department orders.

In addition, the chipmaker’s ended last year with $21.1 billion in free cash flow. By securing more hefty government production contracts, its coffers will grow even bigger. That means it will have enough money to fully equip its forthcoming fabs with state-of-the-art manufacturing tools, such as ASML’s extreme ultraviolet lithography (EUV) machines.

With IBM’s help, Intel could develop next-generation EUV nodes that would allow it to catch up to TSMC.

Admittedly, the Taiwanese provider will not sit still while a rival eats up its market share. Earlier this month, it made arrangements to spend $35 billion on its Arizona-based gigafab. But Intel has the capital and the will to make up lost ground with great expediency. Within a decade, it could be a major presence within the foundry sector.

Ironically, Intel cannot achieve that long-term goal without the near-term support of its future competitor.

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