Intel Faces Setbacks, 3nm Orders Shifted to TSMC

Intel's semiconductor manufacturing business is facing challenges, with reports indicating that the company has outsourced all processes below 3nm to TSMC and initiated a global 15% workforce reduction to reverse its declining performance. However, sources reveal that the layoffs mainly target the semiconductor manufacturing division, while Intel's Taiwan office remains unaffected to maintain chip production activities.

Industry experts note that developing advanced manufacturing processes requires significant investment, yet Intel's competitors are falling behind, leading the company toward a "winner-takes-all" scenario. Starting with the Lunar Lake generation, Intel's CPUs have incorporated TSMC's manufacturing capabilities.

Despite these setbacks, Intel continues to pursue its semiconductor manufacturing ambitions. In July, the company launched its 18A process design kit (PDK) to the IC manufacturing sector. However, recent reports suggest that Broadcom has expressed concerns about Intel's 18A process, concluding that it is not ready for mass production. A Broadcom spokesperson stated that the company is still evaluating Intel's offerings but has not reached a final decision. Broadcom has a longstanding partnership with TSMC, especially in advanced nodes below 7nm, solidifying its position as one of TSMC's top clients.

Intel's latest quarterly report highlights a $2.8 billion loss in its semiconductor manufacturing business, with an operating profit margin of -65.5%. The company acknowledged that the expansion of Intel 3 and Intel 4 production in its Irish facility has put additional pressure on profitability, reflecting the significant challenges in achieving both technological breakthroughs and mass production capabilities in the semiconductor industry.

In response, Intel is streamlining operations, aiming to save $10 billion by 2025 through cost-cutting measures, business divestitures, and halting dividends for the first time in 30 years. The company is also slowing its global expansion efforts. Semiconductor analysts stress that Intel has no room for retreat and must focus its resources on its core chip business to survive.

Unlike AMD's earlier decision to outsource chip manufacturing to TSMC, Intel's strategic alignment with the U.S. government's chip security policies gives it a crucial political role. Intel’s current CEO, Pat Gelsinger, remains committed to the IDM 2.0 strategy, believing it to be the only path to restore Intel's former dominance, even if it drains most of the company's resources. For Intel, it appears there is no alternative.