Intel's next-generation Panther Lake (via SeekingAlpha) processors will contain 70% in-house silicon, positively affecting the company's margins. However, with Nova Lake CPUs due in 2026, even more silicon will be made internally, which means this one will bring in even more profits for Intel. But there is a slight catch.
"In Panther Lake, some tiles would be external, but the majority of the millimeter square in the package are back internal," said Pat Gelsinger, chief executive of Intel, at the earnings conference call with analysts and investors. "It is more 70% plus of the silicon area is back in-house. So, the majority of Panther Lake wafer capacity by a good margin is coming back inside for Intel."
All tiles of Intel's current-gen flagship Arrow Lake and Lunar Lake processors for desktops and laptops are made by TSMC and then assembled and packaged by Intel using its Foveros 3D packaging technology. This severely impacts profit margins, as TSMC has its profit margin to earn, and Intel must stay competitive with AMD and other rivals in terms of pricing so it cannot pass TSMC's margin on to customers.
Another factor that hit Intel's margins with Lunar Lake was on-package memory, as it required procurement and handling and made packaging more expensive. As more of Intel's designs are created internally, the company's margins are set to improve.
With Panther Lake, Intel will make the CPU's main compute tile using its 18A process technology. However, Gelsinger did say that some Nova Lake SKUs will be produced at TSMC.
"With Nova Lake, we definitely have some SKUs that we are looking at continuing to leverage externally, but the large majority of Nova Lake and more of the additional tiles have come back in-house as well," the chief executive of Intel said.
This means that while specific Nova Lake models will contain more than 70% silicon made at Intel, others will use more elsewhere. Therefore, some SKUs will have a higher margin for Intel, and others will feature a lower margin for Intel.
"We still have some flexibility in the Nova Lake product, but the large majority of that is committed to the Intel Product or Intel Foundry," said the head of Intel. "So overall, we are absolutely executing on the bringing wafers home strategy that we have laid out."
Also, he emphasized that if an external process technology can greatly benefit a certain product, Intel might select it for this product in the future. So, going forward, we will continue to see Intel products made by TSMC.
"TSMC has been a great partner," said Gelsinger. "Clearly, Lunar Lake has demonstrated the strength of the partnership and one that we will use selectively in our product lines for the future."
