Although Intel would like to reduce its use of TSMC’s manufacturing services , the company will keep ordering chips from the Taiwan-based foundry for the foreseeable future, a high-ranking executive said at a technology conference yesterday.
Intel’s grand plan is to produce as many products as possible internally at Intel Foundry, but as this may not be the most optimal strategy, it is currently assessing what percentage of its products should be produced at TSMC.
"I think a year ago we were talking about trying to get [usage of TSMC] to zero as quickly as possible, but that is no longer the strategy," said John Pitzer, vice president of corporate planning and investor relations at Intel, at the Morgan Stanley Technology, Media & Telecom Conference. "We think it is always good to have at least some of our wafers with TSMC. They are a great supplier. This creates healthy competition between them and Intel Foundry."
Intel currently produces silicon for its flagship Core 200-series ‘Arrow Lake’ and ‘Lunar Lake’ processors for desktops and laptops at TSMC and then assembles them using its Foveros 3D advanced packaging technology at its packaging facilities in the U.S. As a result, the company has to pay TSMC a premium, which significantly hurts its gross margins.
With its next-generation Core 300-series ‘Panther Lake’ CPUs, Intel expects to use its own manufacturing facilities, including the most advanced Fab 52 and Fab 62 in Arizona, to make the compute chiplet of the processor using the company’s 18A fabrication technology. Since the majority of manufacturing operations will be performed internally, Intel expects to enjoy higher gross margins with its next-generation products.
However, some of Intel’s products will continue to be made at TSMC. Currently, around 30% of Intel’s products are outsourced, but the company expects this share to decrease considerably in the future.
"Not quite sure what the right sort of [outsourced production] level is," said Pitzer. "Is it 20%? Is it 15%? We are working through that. But we will use, I think, external foundry suppliers longer under this new strategy."
Intel is, of course, interested in producing its most advanced high-margin products, such as Xeon processors that cost thousands of dollars each, internally. In fact, the company has never outsourced these parts. And clearly it would prefer not to outsource premium high-volume CPUs for client PCs.
However, Intel may use TSMC’s services to make niche products for client computers as well as various controllers that add tremendous value to Intel’s platforms but are sold for $10–$15.
Such controllers usually rely on trailing nodes that Intel currently lacks (since Intel’s 14nm and 22nm process technologies were designed for CPUs and use proprietary IPs). So the use of TSMC and other foundries to make them is a good fit.
