Intel is considering outsourcing production of core semiconductor chips to outside companies. The company is seeking to regain control of the market by separating semiconductor design and manufacturing as it is losing ground to competitors such as AMD in chip manufacturing.
In 2020, Intel CEO Bob Swan suggested that it may entrust a third party with 7-nm chip production. Industry observers began to predict that Taiwan's TSMC and Korea’s Samsung Electronics would be tasked with the outsourcing work.
Intel is lagging behind its arch rival AMD in the development of 7-nm chips. While AMD have already started producing 7-nm chips, Intel had to delay production for six months due to low yields.
Third Point, a U.S. activist hedge fund known to hold Intel shares worth about US$1 billion, told Intel in December 2020 that it was lagging behind TSMC and Samsung Electronics in chip manufacturing technologies. The hedge fund called for a strategic alternative, saying that Intel should rethink about its vertically integrated business model from design and development to manufacturing.
Many industry insiders believe that TSMC is likely to produce chips for Intel. As TSMC is a foundry company that is not engaged in semiconductor design, it is considered to have an advantage over Samsung in terms of security. Samsung is a foundry but is a major competitor of Intel in chip designing. Bloomberg reported Intel’s discussion with Samsung Electronics is in the preliminary stage compared with that with TSMC.
However, others say that Intel may choose Samsung Electronics because TSMC’s production lines are already full.
If and when Samsung Electronics joins hands with Intel, it will be able to narrow its gap with TSMC, which is the number one foundry company in the world. In 2020, TSMC enjoyed a 54 percent share against Samsung’s 17 percent.
Samsung Electronics is expecting more than 20 trillion won in sales in its system semiconductor business for the first time in 2021.