Friday, June 30, 2023

Intel Takes Strategic Steps to Regain Semiconductor Chip Leadership

Intel plans to separate its manufacturing and fabless units to regain its semiconductor chip leadership. The move aims to serve emerging markets and make chip manufacturing more efficient. Intel seeks to emulate TSMC's success and become the second-largest external foundry by 2030.

In an effort to reclaim its position as a leader in the semiconductor chip industry, Intel has announced plans to separate its manufacturing and fabless units. This strategic move aims to address evolving market dynamics and capitalize on emerging sectors such as cloud computing, edge computing, and artificial intelligence (AI). By granting independence to its foundry business and diversifying its chip production, Intel aims to regain its competitive edge and accelerate chip development.

Diversifying into New Markets

Intel's factories have traditionally focused on serving the PC and server markets, but the company recognizes the need to adapt to the changing landscape. By separating fabless and manufacturing operations, Intel can now cater to a broader customer base, including external clients. The new fabs, set to be operational by early 2024, will manufacture chips for non-Intel customers, making Intel a potential competitor to contract chip manufacturers like TSMC.

Emulating the TSMC Playbook

Intel's strategy shares similarities with Taiwan Semiconductor Manufacturing Co. (TSMC), which has successfully produced chips for companies like Nvidia, Apple, and AMD. TSMC's approach of guaranteeing capacity to long-term partners during the recent chip shortage has proven effective. Intel aims to replicate this success by becoming the second-largest external foundry by 2030 and generating more than $20 billion in manufacturing revenue.

Competing for Internal Fab Capacity

The separation of fabless and manufacturing units introduces a new dynamic within Intel. Internal chip design units will now compete with external customers for fab capacity, potentially accelerating Intel's internal chip design efforts. The competition for volume will drive efficiency and faster innovation, as internal business units can leverage third-party foundries if they are willing to pay top dollar for guaranteed capacity.

Reviving Manufacturing Prowess

Intel's ability to deliver chips on time has been a key challenge, allowing TSMC to emerge as a leader in the industry. However, Intel aims to regain its position by focusing on advanced nodes such as the Intel 18A process, which incorporates cutting-edge technologies like gate-all-around (GAA) transistors. By emphasizing more efficient manufacturing processes and performance improvements, Intel intends to win back customers and regain its reputation as a reliable chip manufacturer.

Intel is expanding as a foundry in Europe

Intel's expansion plans in Europe took a significant step forward as the company signed a deal with the German government to build a €30 billion chip manufacturing site in Magdeburg. Germany will cover a third of the investment, marking the largest foreign direct investment in the country's modern history. The agreement was signed during a meeting between German Chancellor Olaf Scholz and Intel CEO Pat Gelsinger in Berlin. The investment will significantly expand Intel's production capacity in Europe and is seen as a crucial strategic move for Germany and Europe to establish self-sufficiency in strategic technologies. The project, known as the "Silicon Junction," is expected to create 3,000 high-quality jobs and additional positions in supplier networks. The EU's executive branch will review the plan to ensure fair competition. With this expansion, Germany aims to become one of the major global semiconductor production sites and reduce its dependence on imported chips and global supply chains. The completion of the twin semiconductor plants is expected by 2027 and will contribute to the EU's goal of decreasing reliance on China and the US for microchip production.


Intel's decision to separate its manufacturing and fabless units marks a strategic shift aimed at regaining its leadership in the semiconductor chip industry. By diversifying into emerging markets, emulating successful models like TSMC's, and focusing on advanced manufacturing processes, Intel hopes to reclaim its competitive edge and position itself as a leading player in the evolving landscape of chip manufacturing.


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