Intel Shifts to TSMC for Chip Manufacturing Amid Mass Layoffs: The Growing Challenges in Wafer Production

Intel Faces Major Setback in Wafer Foundry Business

Intel has encountered significant challenges in its wafer foundry operations. According to a report from Taiwan's "Economic Daily News," the company has opted to outsource all advanced processes at 3 nanometers and below to TSMC. This decision comes as Intel grapples with intense market competition and financial pressures. Additionally, the company has announced a global workforce reduction of 15%.

As the semiconductor industry increasingly embraces a "winner-takes-all" mentality, the rising costs associated with advanced process technologies are creating formidable obstacles for companies like Intel. Despite its efforts to expand its own foundry capabilities, Intel's market performance has fallen short of expectations. Industry insiders reveal that Intel's shift to TSMC for manufacturing began with the Lunar Lake CPU series, highlighting a strategic pivot between in-house production and outsourcing.

Unfortunately, this strategic shift has not fully alleviated Intel's struggles. The company's latest quarterly report from the UK reveals that losses in its foundry business have reached $2.8 billion, with an operating profit margin plummeting to -65.5%. These figures underscore the significant pressures Intel faces in the wafer foundry sector, presenting a serious threat to its overall financial health.

To navigate these challenges, Intel plans to implement a series of cost-saving measures, targeting $10 billion in savings by 2025, divesting non-core business units, and suspending dividends. Furthermore, the company intends to reduce unnecessary expenditures through layoffs, refocusing resources on its core chip business.

Industry experts view these initiatives as necessary but difficult choices. They warn that if Intel does not promptly address its current issues, it will confront even greater challenges amid intensifying competition and rapid technological advancements.

Notably, Intel's decision to fully outsource its 3-nanometer and below processes to TSMC has garnered significant attention within the industry. This move not only reinforces TSMC's position as a leader in advanced process technologies but also signals profound changes in the global semiconductor landscape. As technology evolves and market dynamics shift, competition within the semiconductor industry is expected to become even more aggressive and complex.