There is no way Intel is going to exit fabrication.
They're using TSMC out of necessity, not desire. Intel's fabs are integral not only to their success and profits, but to the infrastructure of the United States itself. We simply cannot allow all CPU fabrication to be offshored, especially when most of it is close to China (Taiwan / TSMC). Samsung is too busy pumping out smartphone / tablet CPUs and NVIDIA's GPUs, so even if Intel wanted to use them, there's not enough capacity.
Intel is going to have to get their shit together, not just for their own sake, but for strategic manufacturing security interests of the United States as well.
At some level this situation was inevitable, as more and more companies offload their fab capability to TSMC, that gives more and more money for TSMC to invest in boosting their capability, and of course while their margins are a lot less than Intel's with enough money that advantage goes away as well.
Intel's instruction set architecture dominance will keep it going for a long time but ultimately it would probably make sense for Intel to spin off its fabs into the US equivalent of TSMC and capture more margin revenue from their designs versus their process.
So what's the big plan? Fab its own CPUs at TSMC with a better process and use its own fabs for contract manufacturing? But Apple, Nvidia, AMD, Qualcomm, Mediatek are the largest customers by volume and I don't think they would switch from TSMC to Intel soon.
Maybe some Chinese CPU manufacturers would like to use Intel but there is a trade ban for China.
Also, seeing how Intel likes to jack prices from time to time, I wouldn't want to depend on Intel for all of my manufacturing.
I said this yesterday in a different thread, but Intel needs to jettison its design business and just be a foundry. Pulling a reverse AMD. I don’t think they’ll be able to meaningfully acquire customers for their foundry business unless they split the company. I also think their foundry business is the one thing that could cause the stock to soar, and was historically what gave them their edge. I think there is a lot of demand for another possible fab outside of TSMC[1] because of the risk China poses to Taiwan but only if there is a process advantage. Right now TSMC has proven itself to be stable and continues to deliver for its customers. Intel is playing catch up, and sort of needs to prove it’s dedicated to innovating its fab business. I don’t think competing with its potential customers is a way of doing that.
[1] I know Samsung has foundry services (among others) but I don’t think they have the leading node capabilities that really compete with TSMC.
Intel is behind, but not actually that behind. Spinning off their fab business at this point in time is throwing money in to the sea. TSMC doesn't have the capacity to handle the volume of Intel orders anyway.
I'm bullish on Intel. Having an engineer at the top will fix all sorts of subtle problems quite quickly. Their manufacturing process for both 10nm and 7nm are now supposedly back on track, and yet they have a large backlog of designs waiting for the new processes to ramp up. We may see rapid performance increases from them now their pipeline is unblocked.
Additionally, US politics is now aligning across the aisle against China, and relying too heavily on TSMC looks like a potential future geopolitical problem. Intel is the only firm that can realistically keep up or out-fab TSMC and thus the USG will be loathe to let it even look like it might fail. Simply having fabs physically within your territory but managed by a remote firm, is clearly no substitute for having fabs actually managed by a domestic company (consider how many ways there must be to do the equivalent of SSH-ing into a fab, or otherwise subtly sabotage it from HQ).
There are only two companies capable of fabricating the most advanced processor technologies: TSMC and Intel. The disaster of 10nm at Intel has meant that all of its product lineup has had to internally compete for 14nm fab space, greatly constraining supply there. Meanwhile, Global Foundries' decision to abandon chasing smaller nodes means that fabrication for pretty literally everybody else has had to compete for space in TSMC, so smartphones, GPUs, CPUs, TPUs, etc. are all vying for the same fabrication capacity. Furthermore, it is extremely expensive--$10 billion or so--to make a new fab, so there are few companies that could even afford to throw money at TSMC to expand production.
Put more succinctly: there is literally not enough semiconductor fabrication supply today to meet demand, and the supply is very inelastic.
There is no fab capacity to replace Intel, regardless of the relative performance of in house chip designs. In addition Intel itself is reserving capacity on TSMC's most advanced node.
TSMC is is only going to give Intel unused capacity, essentially lowest priority for a few reasons. 1. Intel will drop TSMC the moment their fabs start working as expected - so you don't want to depend on Intel orders at all. High margin orders one quarter that are gone the next will not help TSMC's business long term. 2. TSMC has enough demand from other companies - they even turned down NVIDIA for most of their GPUs 3. A weaker Intel allows TSMC to command higher margins long term. helping keep Intel while it's still a massive competitor makes no strategic sense.
> But it's not giving up on Intel fabs to get their stuff produced by TSMC.
Manufacturing at the leading edge is getting increasingly expensive, to the point where every fab other than TSMC, Samsung, and Intel has bowed out over the years and has never operated on the leading edge again.
A major part of the reason for this consolidation is that fabs need more and more economies of scale in order to make up the cost of the initial investment in the fab. If you can't achieve those economies of scale, then the manufacturing node will never be profitable, and whoever's bankrolling it will quickly pull the plug. (GlobalFoundries exiting the 7nm market is the most recent example of this.)
If Intel outsources leading edge production to TSMC or Samsung, they will lose operational experience and infrastructure needed to operate fabs at the leading edge, and their fabs will never be competitive for leading edge production again (barring a major misstep by TSMC or Samsung).
Intel has lost its manufacturing lead, but these changes are not permanent. There is a good chance TSMC stumbles as transistors shrink. Intel has a chance to catch up, but it seems like Intel has structural problems that prevent it from winning deals to manufacture third party designs. Relying on complete vertical integration doesn't seem like a winning business model anymore.
Perhaps Intel should buy GlobalFoundries or license Samsung technology to develop competency in building designs for other customers.
Well, give it 1-2 more years and they will leapfrog TSMC with their manufacturing process. 18A is allegedly still on track, and Intel is also getting into foundry business, I can totally imagine NVIDIA switching to Intel for their next-gen GPUs for example. That, combined with worries about China attacking Taiwan makes me bullish on Intel stock.
I don't think it is. However, that brings the question of why would TSMC allocate capacity for Intel. If in the long term Intel plans on going back to using their fabs, why offer them this short-term advantage?
Unless intel decides to fund the creation of a fab just for themselves with tsmc but that'd be a much much more expensive process and likely mean that they'd be giving up on their own fabs in the not too distant future.
I think this is the wrong way of looking at it - and actually the way that Intel themselves describe it. Intel think of themselves as a manufacturing company whose designs drive demand for their fab. But in truth, most of their value comes from x86 which could be produced by any fab. To stay competitive, their high end designs need to be on the absolute bleedge edge process. Which up until now has been Intel fabs.
But it's not giving up on Intel fabs to get their stuff produced by TSMC. They need to do both - they need to make money by producing the best designs in the market no matter what the process in the high end space, as wl as sinking investment into their fabrication side to make sure that in 5 years time they're the leading fab. At which point they can turn around and say F-U to all those TSMC customers, produce only Intel chips and use that to capture market share.
They're using TSMC out of necessity, not desire. Intel's fabs are integral not only to their success and profits, but to the infrastructure of the United States itself. We simply cannot allow all CPU fabrication to be offshored, especially when most of it is close to China (Taiwan / TSMC). Samsung is too busy pumping out smartphone / tablet CPUs and NVIDIA's GPUs, so even if Intel wanted to use them, there's not enough capacity.
Intel is going to have to get their shit together, not just for their own sake, but for strategic manufacturing security interests of the United States as well.
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