Intel Corporation is reportedly outsourcing some of its 14 nm chipset capacity to Taiwan Semiconductor Manufacturing Corp., as its ability to meet production demands has run into headwinds in recent months.

Intel is planning to outsource its entry-level H310 and other 300 series chipsets to TSMC, as supply of its 14 nm chipsets has fallen as much as 50 percent below capacity, according to a DigiTimes report, citing unnamed industry sources.  

 

A 14 nm Intel Broadwell chip. Image used courtesy of Intel.

 

Intel officials noted that the company uses external foundries for some products, but added that is not considered a change from its normal strategy.

“In response to the stronger than expected demand environment, we are continuing to invest in Intel’s 14 nm manufacturing capacity,” the company said in a statement to All About Circuits.

 

The Backdrop of TSMC and Intel's Relationship

TSMC is the world’s largest semiconductor foundry and has worked with Intel as a manufacturer on various products, including microprocessors for Apple’s iPhone. According to their website, TSMC produced the industry's first 16 nm FinFETs in 2013. Since at least 2009, the company has invested in developing the ability to produce 14 nm chips.

Mario Morales, program vice president for IDC’s semiconductor group, said the report is not surprising based on the past relationship of the companies. “That’s been happening for a number of years now. Intel has been outsourcing some of its Southbridge controllers and its baseband ICs that go into Apple iPhones."

He said, based on the anticipation that Apple will announce its new lineup of iPhones, he expects Apple to use Intel for its baseband needs, as opposed to using a combination of Intel and Qualcomm. 

The report comes just weeks after AMD, one of Intel's largest competitors, announced a new plan to move its 7 nm production to TSMC, a development that led several securities analysts to raise the price target of AMD shares, based on the notion that AMD would effectively have chipsets in the market that outperform Intel’s 10 nm offerings. 

 

TSMC's 7 nm FinFET process technologies have proved attractive to chip developers. Image used courtesy of TSMC.

 

Anticipating Changes to the Industry: 7 nm Chips, Cryptocurrency Markets

During the TSMC second-quarter conference call, company executives said they expected the business to benefit during the third-quarter from 7 nm product launches. They also, however, warned that cryptocurrency mining demand would soften due to weak crypto prices. 

For the full year, TSMC executives said the overall semiconductor business would grow by 5 percent, excluding memory, while foundry would grow by 7 percent. They said the company’s 2018 revenue would grow by high single-digit figures rather than a previously forecast 10 percent due to the aforementioned weakness in cryptocurrency mining demand. 

Bob Swan, interim CEO of Intel, told securities analysts during a July conference call that matching production with customer demand was an ongoing challenge: “We are seeing demand signals in supply feasibility to deliver on our revised expectations,” he said during the call. “Our biggest challenge in the second half will be meeting additional demand, and we are working intently with our customers to be prepared so we are not constraining our customer’s growth.”

 

Chip Shortages or Competition with AMD?

In a report issued earlier this month by Taiwan-based TrendForce, a global market analysis firm, TrendForce revised its global notebook shipments down citing a shortage of Intel CPUs. The firm noted that Intel was scheduled to begin mass production of CPUs based on its Whiskey Lake platform during the third quarter, but due to the weak supply the firm is forecasting global notebook shipments will drop 0.2 percent for the year.  

Rob Enderle, principal analyst of the Enderle Group, questions whether the new Intel move is designed not only to deal with its own internal production issues but to counter AMD. 

“For TSMC they are a FAB for hire and apparently they have the capacity for this,” he said. “The question in my mind, given AMD just shifted capacity themselves and to TSMC is whether Intel is really attempting to tie up TSMC’s capacity so AMD can’t use it. Intel’s security problems have been shifting buyers to AMD and Intel has been creative in countering AMD in the past and they can outspend AMD.”

 

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Comments

1 Comment


  • kjmclark 2018-10-05

    This article is funny, coming just a day after a major Bloomberg article that the Chinese government installed hardware hacks into boards subcontracted from Taiwan to Chinese factories.  So our top-level chip makers are starting to outsource some production to Taiwan, and there’s a fair chance some of that will be subcontracted to China.  Even if it isn’t, it’s very possible the designs will be hacked in Taiwan.

    • kjmclark 2018-10-05

      Actually, this article hit the AAC email feed a day after the report in Bloomberg - the article is from a week ago.