Intel Outsources Manufacturing to TSMC: A $14 Billion Partnership

There have been reports that, in response to the production needs of new products, Intel plans to significantly increase its outsourced orders in 2024 and 2025. A substantial portion of these orders will be directed toward Taiwan Semiconductor Manufacturing Company (TSMC), resulting in a higher proportion of collaboration and deepening the partnership between the two entities.

According to TomsHardware, semiconductor analysis reports indicate that TSMC has secured over $14 billion worth of orders from Intel, with nearly $4 billion slated for 2024 and over $10 billion for 2025. It is understood that by the end of next year, TSMC may allocate a monthly production capacity of 15,000 3nm wafers for Intel, which is expected to increase to 30,000 wafers per month by 2025. By then, Intel is projected to become one of TSMC’s top three clients and the second-largest customer for its 3nm process node.

Analysts note that TSMC’s manufacturing capabilities are exceptionally strong, to the extent that once used, it’s hard to go back. While Intel has thus far insisted on outsourcing only GPU and I/O module chips, starting with Lunar Lake, it will include computing modules, marking Intel’s first time outsourcing the production of high-performance x86 cores. Assuming Intel’s internal capacity remains constant, the annual augmentation of 19-20% in outsourced production capacity implies that by 2024, outsourced products will contribute 28% to Intel’s revenue, rising to 44% by 2025.

Utilizing TSMC’s manufacturing services offers Intel numerous benefits. These include access to more advanced process technologies, reduction in manufacturing and process development costs, capital expenditure savings to facilitate higher cash dividends, lower depreciation expenses, and the ability to offer more competitively priced products.