Intel expands processor outsourcing to TSMC amid foundry challenges
CALIFORNIA, UNITED STATES — Intel is reportedly increasing its reliance on Taiwan Semiconductor Manufacturing Company (TSMC) for the production of its upcoming Arrow Lake processors.
This move marks a significant shift in Intel’s manufacturing strategy as the company faces ongoing challenges with its in-house foundry division, Intel Foundry Services (IFS), which has struggled to meet performance expectations.
Intel Foundry Services faces challenges, leading to outsourcing
Intel’s decision to outsource more of its semiconductor production stems from the underperformance of IFS, which has been unable to keep pace with competitors like AMD.
According to reports, Intel is ramping up orders for TSMC to manufacture key components of its Arrow Lake and Lunar Lake processors. This shift is seen as a necessary step for Intel to remain competitive in the CPU market, particularly as AMD continues to leverage TSMC’s advanced semiconductor technology.
The Arrow Lake series, specifically the Core Ultra 200 SKUs, represents a pivotal moment for Intel. For the first time, the company has opted to use an external foundry for such a critical product line. This decision underscores Intel’s need to ensure high-quality manufacturing as it advances innovations like Foveros 3D packaging technology.
TSMC’s 3nm process key to Intel’s future chips
Intel’s growing dependence on TSMC raises questions about the future of its manufacturing operations. The tech giant is expected to use TSMC’s 3nm process for both its next-generation Falcon Shores AI accelerators and Arrow Lake compute tiles.
This deepening partnership suggests that Intel may be pivoting away from its traditional model of producing chips in-house, instead focusing on external suppliers to maintain market leadership.
TSMC’s 3nm technology is considered one of the most advanced in the industry. By outsourcing production, Intel hopes to close the gap with competitors like AMD and NVIDIA, both of which have long relied on TSMC’s capabilities.
Intel’s strategic shift in semiconductor manufacturing
The decision to outsource more production reflects a broader strategic shift within Intel. Last August, the company announced plans to significantly scale up its outsourcing efforts.
In addition to TSMC, Intel has expanded collaborations with other Taiwanese suppliers, such as Egis Technology and Alchip, which specialize in packaging technologies. These partnerships are part of a larger effort by Intel to enhance its supply chain and integrate advanced packaging solutions into its mainstream products.
As operational costs rise and profits within IFS continue to decline, some industry experts speculate that Intel may consider more drastic measures, such as selling off parts of its foundry division.
