After calling Taiwan a geopolitically unstable location for manufacturing, Intel CEO Pat Gelsinger flew to the country to negotiate with rival foundry TSMC about outsourcing more of Intel's own chip manufacturing to the company. Unsurprisingly, Gelsinger's rhetoric changed on the trip as he admitted that TSMC's contract production model has largely enabled a bustling ecosystem of chip production and innovation. He also said that Intel would continue to invest in Taiwan but still stressed that the global chip production chain must be balanced.
"TSMC has unlocked the magic of silicon for us and others in the industry in so many ways," said Gelsinger in a pre-recorded video (below). "What TSMC has done is spectacular. At the heart of much of this is innovation indigenization is Taiwan. It is nothing short of amazing what Taiwan has become in the last several decades."
For Intel, Taiwan is a very special place, and TSMC is a very special frenemy. Intel is pursuing a new IDM 2.0 strategy that will find it producing chips for others, much like TSMC, making other foundries in Taiwan its rivals. But for a company that outsources production of some of its products and which also works with various Taiwan-based OEMs, ODMs, and manufacturers, Taiwan is extremely important.
To that end, Intel will continue to invest in Taiwan (and even in China despite geopolitical tensions between the U.S. and the P.R.C.) as long as it remains a major high-tech development and production hub. In fact, Intel already outsources more than 25% of its production to external chipmakers like TSMC.
However, as an IDM 2.0 company that has a global semiconductor production network, Intel will continue to emphasize the importance of an international supply chain with fabs located in different parts of the world. To a large degree this happens because it is extremely hard for Intel to compete against companies in Taiwan and South Korea as they get huge incentives and support from their governments when they build new fabs.
"We, the semiconductor industry, need to find a global solution that satisfies the incredible demand for our technology," said the head of Intel. "We must build factories faster, run them at higher yields, install more equipment, and do so in a way that balances the global supply chain for the future."