Intel can’t keep up with 14nm demands and outsources to TSMC

Intel has been moving from one PR minefield to another and has so far managed to come out of everything relatively unscathed, but it seems that minor cracks are beginning to show. With the company’s future uncertain as they delayed the 10nm production process well into 2019, and with new variants of Spectre and Meltdown being documented each month, it’s rather ominous to read reports that the company’s award-winning 14nm production process is running into issues as well. And the process woes at Intel have affected more than just their future products – it’s affected their relationships with their hardware partners too.

In a report from Digitimes that was published on Monday, Intel is looking to use third party foundry facilities to make up for a lack of 14nm production. There is, according to insiders, a shortage of 14nm wafers because the company had planned to reduce their 14nm capacity ahead of time, expecting the 10nm process issues to be fixed before the end of this year. The drop in 14nm production means that Intel doesn’t have enough supply to cover their own products based on the process, which includes 14nm chipsets, processors, and modems. Previously, most of Intel’s chipsets and modems were fabricated on a 22nm process which was much cheaper. Those lines have since been decommissioned, so 14nm is their only option.

To make up for the drop in production, insiders have reported to Digitimes that the company is outsourcing production to TSMC to make up for the shortfall. TSMC will be manufacturing several chipsets for Intel as well as some of their modems and processors. This means that, for the moment, there will be another stock shortage of these products as TSMC ramps up production, and this partnership should extend into 2019 and even 2020, because Intel doesn’t expect their 10nm parts to be shipping until holiday season 2019 for OEM partners.

The delay in the availability of 10nm has also had an effect on Intel’s partnerships with their OEMs, particularly Hewlett-Packard Enterprise (HPE). According to documents seen by SemiAccurate, HPE is recommending to their sales teams and product managers that any channel stock from their Gen 9 series of products that ships with Intel Xeon processors should be arranged on a first-come-first-served basis, as long as stocks last. They are encouraged to instead point customers to similar products that ship with AMD’s EPYC processors instead if customers are pressed for time. Larger orders should start with Gen 10 EPYC products because there’s more stock available.

In the documents, HPE does note that they expect supply constraints to ease a little in September/October 2018, but the use of “significant” could mean anything from a full recovery to a partial stock recovery.

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