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News Report claims that Intel will build Core i3s at TSMC

NTMBK

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Nov 14, 2011
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Reporting from Tom's Hardware here, and the actual report from Trendforce here.

Intel has outsourced the production of about 15-20% of its non-CPU chips, with most of the wafer starts for these products assigned to TSMC and UMC, according to TrendForce’s latest investigations. While the company is planning to kick off mass production of Core i3 CPUs at TSMC’s 5nm node in 2H21, Intel’s mid-range and high-end CPUs are projected to enter mass production using TSMC’s 3nm node in 2H22.

...

TrendForce believes that increased outsourcing of its product lines will allow Intel to not only continue its existence as a major IDM, but also maintain in-house production lines for chips with high margins, while more effectively spending CAPEX on advanced R&D. In addition, TSMC offers a diverse range of solutions that Intel can use during product development (e.g., chiplets, CoWoS, InFO, and SoIC). All in all, Intel will be more flexible in its planning and have access to various value-added opportunities by employing TSMC’s production lines. At the same time, Intel now has a chance to be on the same level as AMD with respect to manufacturing CPUs with advanced process technologies.
I have no idea how credible Trendforce are, or what their track record is, but they seem pretty confident. Sounds like Intel might be pivoting their internal fabs to be "IBM-like"- lower volume, higher margin products, tuned to absolute max performance, and don't need to yield high enough to manufacture cheap PC chips.
 

Vattila

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Oct 22, 2004
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The problem for the rest of the industry with this is that an Intel, with it's very deep pockets, combined with an Apple, with their much deeper pockets, can easily outbid everyone for wafers
I see this often on message boards. But it is not correct. Intel (or Apple) does not pay for wafers out of their cash pile (retained earnings are part of shareholders' equity on the balance sheet). Wafer cost is part of cost of sales, which has to be covered by revenues. Revenue minus cost of sales is gross profit, and the ratio is called gross margin. Investors are crazy about gross margin. Companies with growing gross margin are rewarded with elevated stock prices, and vice versa, companies with declining gross margin are punished.

Intel can only afford to pay more for wafers if they can raise the average selling price (ASP) of their products accordingly, as to maintain gross margin. Otherwise they will get punished. Their margins are already under pressure due to the more costly 10nm process (compared to 14nm), combined with competitive pressure from AMD on their ASP.

Recently, Intel has used their cash pile primarily for shareholder returns; i.e. stock buy-backs and dividend. This aims to counteract the punishment the stock has taken due to the declining gross margin, process development failures and weaker competitive position. However, many argue they should use more of it to invest in their future (R&D and capital expenditure). Noteworthy, TSMC is now vastly outspending Intel, with $25-28B in capital expenditure planned for 2021. For comparison, Intel spent $14B in 2020, which is less than the $17B planned.

Also note that Intel's cash on hand ($24B) after subtracting long-term debt ($34B) is negative. Total liabilities were $72B for 2020; a 22% year-on-year increase.

Intel Total Liabilities 2006-2020 | INTC | MacroTrends

Regarding outsourcing, the primary argument for the Integrated Device Manufacturer (IDM) business model, is to increase gross margin by driving down manufacturing cost. By outsourcing manufacture you have to pay the manufacturer their gross margin. Now, with a dual strategy, Intel has the cost of keeping up their own manufacturing, while at the same time paying the price of outsourcing. I guess that will be hard to balance.

Regarding bidding for wafer supply, Intel has a couple of options to sweeten the deal, that does not affect their gross margin negatively:
  1. Due to their size, they can of course offer to buy large volumes, and agree to large penalties, if not met. Large volumes may even allow lower pricing. However, giving TSMC large volumes and revenue undermines their own manufacturing ambitions as an IDM. And for TSMC it may be a risk, if the relationship is only temporary, since they may end up with excess capacity.

  2. Use their cash pile to invest in joint ventures; such as R&D and capital investment (e.g. joint fabs). By the way, AMD did this in their "big lift" to 7nm (as CTO Mark Papermaster described it), by working with TSMC on the process, design rules and EDA tools. However, partnering with Intel may not be in TSMC's best interest, if it aids Intel's IDM ambitions.
 
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moinmoin

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Isn't this old news? I thought I read something like that a couple months ago already. Core i3 is such an odd delimiter about what exactly to outsource.

Edit: Yeah, was mentioned two months ago already:
 
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jpiniero

Lifer
Oct 1, 2010
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Isn't this old news? I thought I read something like that a couple months ago already. Core i3 is such an odd delimiter about what exactly to outsource.
Core i3 on desktop is usually a different smaller die. So that part isn't that outrageous.
 

jpiniero

Lifer
Oct 1, 2010
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Intel only launched small dies on its post 14nm nodes so far (Ice Lake SP would change that, but still isn't out).
Right, which is why fabbing the 12th Gen desktop i3 on a node that's not 10 nm makes sense. But TSMC 5 nm? To me it seems more realistic that they would just use Skylake yet again or a cut down Rocket Lake.
 

Mopetar

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Jan 31, 2011
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AMD is going to be using 5nm for Zen 4, which is also coming out 2H21. If Intel want to be competitive they will need to keep up.
Also every 5nm wafer Intel buys from TSMC is one that AMD (or anyone else who might be competing with Intel) doesn't get. If they go with a small die that will yield well then they can easily eat a margin hit on their low end products if it means AMD has fewer chips to sell.

Intel doesn't have enough capacity for their own chips anyway so even if they don't make as much money as if they were able to fab everything themselves, they can't actually do that so the extra chips just give them additional revenue.
 
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gdansk

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Feb 8, 2011
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Odd. I would have expected a Tremont or perhaps Gracemont based part to be the first on a outside node. It should have been easier and the ultra-low power space would benefit the most from improved efficiency.
 

mikk

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May 15, 2012
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First part is correct, second most probably not - I'm expecting Zen 4 release in Q1 next year.

This is unrealistic from what we know because there is a Zen 3 refresh generation coming in H2 2021 called Warhol. Furthermore AMD said in November that Zen4 is still in design phase, so it didn't tape out yet and the design isn't even finished. And from tape out to a product release there is roughly 1 year interval.
 
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TheELF

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Dec 22, 2012
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Also every 5nm wafer Intel buys from TSMC is one that AMD (or anyone else who might be competing with Intel) doesn't get. If they go with a small die that will yield well then they can easily eat a margin hit on their low end products if it means AMD has fewer chips to sell.
Even fewer than now?! Hardly seems worth it for intel from that aspect. AMD only released three SKUs and had to raise their prices by $50. They only get so many waffers and it cost them more and more each gen due to having to put more and more tech into them that they have to buy from outside.
To make ZEN3 AMD increased almost everything that the ZEN2 core had and that stuff can't be cheap, even if we are only talking about space on the waffer it has to reduce the amount of CPUs they can make by a whole bunch.
AMD is rapidly improving themselves into a corner here.




Increasing production makes so much more sense.
 

Zucker2k

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Feb 15, 2006
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Also every 5nm wafer Intel buys from TSMC is one that AMD (or anyone else who might be competing with Intel) doesn't get. If they go with a small die that will yield well then they can easily eat a margin hit on their low end products if it means AMD has fewer chips to sell.

Intel doesn't have enough capacity for their own chips anyway so even if they don't make as much money as if they were able to fab everything themselves, they can't actually do that so the extra chips just give them additional revenue.
This. Double-edged sword, really. Offload capacity, limit competitors' access to TSMC 5nm.
/Thread
 

itsmydamnation

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Feb 6, 2011
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To make ZEN3 AMD increased almost everything that the ZEN2 core had and that stuff can't be cheap, even if we are only talking about space on the waffer it has to reduce the amount of CPUs they can make by a whole bunch.
AMD is rapidly improving themselves into a corner here.




Increasing production makes so much more sense.
No they didn't, you really missed the point of what they did with Zen3. The things that really drive size , power and complexity like ROB/PRF size , read/write ports to register file , number of load store ports , size or latency of L1's etc none of that changed. Zen3 is like a complete restructuring/ re balancing of everything in the Zen2 design without growing anything majorly outside the scope of Zen2.
 

moinmoin

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Odd. I would have expected a Tremont or perhaps Gracemont based part to be the first on a outside node. It should have been easier and the ultra-low power space would benefit the most from improved efficiency.
There was a rumor early December based on an Intel job listing that Intel would outsource Atom and Xeon SoCs (likely Xeon D) to TSMC:
I personally consider the possibility of that higher than the Core i3 rumor.
 
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Doug S

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Slightly OT, but TSMC sure is taking expanding seriously this year:

That's the big danger of Intel spending a lot with TSMC. Maybe it benefits them in the short term by limiting AMD's potential growth, but it also means TSMC will expand production even more quickly and further extend their process lead over Intel.

Also don't forget that Intel competes with TSMC for ordering fab equipment, especially equipment in limited supply like EUV scanners. Giving TSMC more money means they buy more EUV equipment and there's less available for Intel to buy (I mean...if one tries to claim that Intel vs AMD buying wafers from TSMC is a zero sum game then one must accept the same claim for Intel vs TSMC buying EUV equipment from ASML)
 

guidryp

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Apr 3, 2006
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At this point there has basically been rumor for practically every segment Intel Makes, that they are going to use third party fabrication, and there has even been rumors, that they will use Samsung as well. Bacially the rumors cover all the possibilities.

What Intel has actually said, is they are considering outsourcing some fabrication.

Now for what would make the most actual sense to outsource fabrications of:

Discrete GPUs and Top End CPU parts.

Of all the rumors so far, I consider i3's one of the less likely target for outsourcing.
 
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jpiniero

Lifer
Oct 1, 2010
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Of all the rumors so far, I consider i3's one of the less likely target for outsourcing
One way it would make sense is that this is a proof of concept or trial. You need something that's decently sized volume to cover the costs of the R&D but if it fails you have a fallback to selling more Skylake or Rocket Lake if need be.
 

Doug S

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Of all the rumors so far, I consider i3's one of the less likely target for outsourcing.
That seems the most likely to me, because they can use an N+1 process. In order to do their leading edge stuff Intel has to get leading edge wafer allocations from TSMC, where they will be waiting in line behind established customers Apple, AMD and perhaps Qualcomm (who seems to switch between TSMC and Samsung)

Not to mention the huge PR black eye they'd have from not making their high end stuff in their own fabs.
 

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