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Samsung Surges After Intel Is Said to Consider Chip Outsourcing

By  and 
January 10, 2021, 8:58 PM EST
  • The two Asian chipmakers mark record highs on the news
  • The U.S. company still hopes to overhaul its own production
 
Photographer: SeongJoon Cho/Bloomberg

Samsung Electronics Co. rose the most in almost 10 months after Intel Corp. was said to be considering asking the South Korean giant and Taiwan Semiconductor Manufacturing Co. to make some of its most sophisticated chips, a major departure for the Silicon Valley pioneer.

After successive delays in its chip fabrication processes, Santa Clara, California-based Intel has yet to make a final decision less than two weeks ahead of a scheduled announcement of its plans, according to people familiar with the deliberations. Any components that Intel might source from Taiwan wouldn’t come to market until 2023 at the earliest and would be based on established manufacturing processes already in use by other TSMC customers, said the people, asking not to be identified because the plans are private.Intel is still holding out hope for last-minute improvements in its own production capabilities. Talks with Samsung, whose foundry capabilities trail TSMC’s, are at a more preliminary stage, the people said. TSMC and Samsung representatives declined to comment. An Intel spokesperson referred to previous comments by Bob Swan, the company’s chief executive officer.

Swan has promised investors he’ll set out his plans for outsourcing and get Intel’s production technology back on track when the company reports earnings Jan. 21. The world’s best-known chipmaker has historically led the industry in advanced manufacturing techniques, essential for maintaining the pace of performance increases in modern semiconductors. But the company has suffered years-long delays that have put it behind competitors that design their own chips and contract TSMC to do the manufacturing.

Intel shares slid 1% Friday. Samsung soared more than 9% to an all-time high in Seoul Monday, the biggest gain since March on an intraday basis. TSMC, which is already operating at full throttle and may not have spare capacity in the short run, stood largely unchanged in Taipei after a 7-day wining streak.Read more: Intel Talks With TSMC, Samsung to Outsource Some Chip Production

What Bloomberg Intelligence Says

Intel’s discussions with TSMC and Samsung solidify expectations that the company will outsource some production, a move we view as unlikely to be easy, cheap or quick, and one that’s likely to dent Intel’s competitive gross margin. Intel’s semiconductor manufacturing operations have been integrally woven into product design and delivery roadmaps since the company’s inception.

- Anand Srinivasan, analyst

Click here for the research.

Under the leadership of Jim Keller, Intel designers moved to a more modular approach to creating microprocessors. This provides more flexibility to either make chips in-house or outsource the work. But Keller left Intel last year, and rivals, such as Advanced Micro Devices Inc. and Apple Inc., have forged ahead with their own capable designs and TSMC’s more advanced production technology. That has put Intel under intense competitive pressure and forced it to make last-minute changes to product road maps, complicating its decision making, the people said.

“We have another great lineup of products in 2022, and I’m increasingly confident in the leadership our 2023 products will deliver on either Intel 7-nanometer or external foundry processes, or a combination of both,” Swan said on a conference call in October. Semiconductor manufacturing processes are measured in nanometers, with ever more microscopically small transistors crammed onto silicon wafers with each new iteration.


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