Intel Reportedly Planning Some Serious Chip Production Outsourcing

By Bill Toulas / January 9, 2021

Intel is reportedly planning to outsource large volumes of chip production to third parties and is negotiating this with TSMC and Samsung. While the American chip-maker has previously outsourced the production of older models to help it keep up with the demand, this time, it’s different in the sense that the deal concerns cutting-edge technology like chips made using the 4-nanometer fabrication process. This is far from what Intel is capable of producing right now, and even from what they are hoping to be in a position to make by early 2023.

It is clear that Intel is looking for a way out of a very difficult situation they have placed themselves in by focusing on maximizing profits from existing technology and not investing enough in R&D in the last decade or so. Not taking drastic measures to turn things around now would equal a business catastrophe, as not having competitive products in the market for even a short period of time could push the otherwise immensely powerful firm to a downward spiral that would be impossible to recover from.

Accepting to outsource production will take its toll on Intel’s profit margins, which is exactly why its board has avoided this option thus far. Recent investor calls for aggressive strategic changes raised the heat on Intel, so they finally had to at least set a course to come outside the pit they have been stuck in for so long.

TSMC and Samsung are already producing 5-nanometer silicon at volume and for a galore of clients, so seeing Intel isolated trying to increase performance on obsolete architecture by raising frequency speeds was somewhat depressing. Also, the way microprocessor development works, not attempting to outsource production earlier felt like they were delaying the inevitable - while continually absorbing PR damage.

The question now is, how much of Intel’s signature tech will remain in the newest models and how many compromises will have to be done to accommodate manufacturing specifics. Intel’s engineers have previously tailored their chip designs to the company’s manufacturing processes, so this will no longer be possible, at least not at the level it was.

From the consumer’s standpoint, we would hate to see a homogenization in chip design, but we may have to accept it up to a point due to cost considerations. Certainly, it will be a better scenario than seeing Intel quit the desktop and mobile chip markets altogether.

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