CALIFORNIA, UNITED STATES – Intel is intensifying its reliance on outsourcing, particularly by turning to Taiwan Semiconductor Manufacturing Company (TSMC) for its advanced semiconductor needs.
This move reflects Intel’s ongoing challenges with its own processes, specifically in the 3nm technology node. In the coming 12–18 months, Intel will outsource the production of its GPUs and CPUs to TSMC, including the upcoming Core Ultra 200 series “Arrow Lake” CPUs and the next-generation Falcon Shores AI chip.
The Falcon Shores AI chip will be manufactured at TSMC on the 3nm process node, while other related backend design and advanced packaging tasks are being outsourced to Taiwanese companies like Egis Technology, Alchip, and KYEC.
Egis Technology, which is already collaborating with Intel on 2.5D packaging technology, will integrate its advanced packaging intellectual property into Intel’s mainstream products.
Increased Outsourcing Budget and Financial Performance
Intel has significantly increased its outsourcing budget in recent quarters, already spending over $19 billion as part of its strategy to fortify its position in both the AI and consumer markets.
This trend is expected to continue as Intel seeks to overcome its current production challenges and stay competitive.
However, Intel’s financial performance in the second quarter of the fiscal year has seen a slight decline. The company reported total revenue of $12.83 billion, down 0.9% year-over-year, with a gross margin of 38.7%, compared to 39.8% in the same period last year.
Revenue from Intel Products was $11.80 billion, missing the $12 billion estimate. Specifically, Client Computing revenue reached $7.41 billion, below the anticipated $7.53 billion, while Datacenter & AI revenue was $3.05 billion, and Network & Edge revenue came in at $1.34 billion.
According to Intel CFO Dave Zinsner, the decrease in gross margin was influenced by three main factors: the rapid expansion of AI PC products, the costly transition of Intel 4 and Intel 3 wafers to a high-volume facility in Ireland, and increased charges for non-core businesses and unused capacity.
Additionally, competitive pricing and an unfavorable product mix also contributed to the pressure on margins.
