More rumours suggest that Intel is turning to TSMC to help with their chip shortage

Intel recently told investors and the public that the 10nm production process is on track, and that they’re pouring about a billion dollars into their 14nm production lines to increase the number of chips they’re able to produce. However, they’re not being very specific on how they’re addressing shortages across their product portfolio. This includes issues that have been reported on before, like a shortage of chipsets and low-end processors, which Intel’s interim CEO Bob Swan admitted to in a carefully worded statement where they promised to focus their efforts on higher-margin products. There have been rumours that circulated before that they were outsourcing production to TSMC, a competing foundry, and new rumours that pile on the old have gone into more detail about what might be happening internally to deal with the shortage.

According to sources reporting to Digitimes, Intel and TSMC have been in discussions about outsourcing some chip production since the middle of 2018, a few months before news broke that there was a chip shortage from Intel. Digitimes says that their sources allege that TSMC will be contracted to manufacture chipsets, low-end processors such as the Intel Atom line and chips designed for use in IoT devices might be fabbed at TSMC’s factories. Previous reports on the matter only suggested that it might be some chipset production that Intel could move over.

Digitimes’ sources also revealed that Intel’s shortage is expected to run into 2019, and supply of 14nm-based products might only meet demand by the end of Q1 2019 as TSMC fills in the gaps. In Swan’s blog post discussing the shortage, a time window for when the shortage would be resolved was not given, but Swan did note that “we will have at least the supply to meet the full-year revenue outlook we announced in July”. Translating from corporate-speak, this means that Intel still expects to earn as much money as they normally would without a supply problem. That could mean that the company might do a number of things to meet that goal, including reaching out to their partners to ease production, or hike up the prices of their processors to distributors to meet their revenue targets. The latter part, at least, appears to have happened in markets outside the US and Canada, with price hikes affecting Intel’s sales in the EU.

Some of Intel’s partners also predicted that things would resolve themselves much later. OEM laptop designer Compal predicted that supply would ease up by 2H 2019, putting a strain on the notebook market and supply chains that distribute RAM and flash memory for SSDs. A shortage of processors for notebooks puts backwards pressure on everything and would result in an oversupply of notebook components, forcing manufacturers to drop their prices, so it’s in everyone’s best interests that Intel’s shortage is fixed as quickly as possible.