Intel CEO Lost 40% Discount For TSMC’s Latest Chip

[tonyget]

Intel CEO Patrick Gelsinger's comments about the Taiwan Semiconductor Manufacturing Company's (TSMC) manufacturing presence in China soured relations between the two firms and eventually led to Intel missing out on key discounts offered by TSMC, according to a fresh report from Reuters. Intel is currently focusing on manufacturing chips with its 18A manufacturing process, and Reuters' report shares that before Gelsinger's comments, TSMC was offering Intel a whopping 40% discount for its 3 nanometer process manufacturing family. However, the Taiwanese firm decided to withdraw the offer following Gelsinger's remarks.

Intel CEO's Remarks About TSMC's Taiwan Risk Soured Relations Between Two Companies​

Ever since Gelsinger took over the helm at Intel, the firm has focused on reestablishing its manufacturing technology leadership in the global chip manufacturing industry and setting up a contract manufacturing division to compete with TSMC. At the same time, Intel is also working with TSMC to outsource some of its production needs to the Taiwanese firm.

As per Reuters, in 2021, TSMC had offered Intel a stunning 40% discount for the 3 nanometer technology. Back then, 3 nanometers was TSMC's leading edge chip manufacturing process. One wafer cost $23,000 back then, and TSMC had offered Intel a 40% discount to bring the price to roughly $14,000.

However, back then, Intel was moving full speed ahead to attract US government subsidies for its contract manufacturing and advanced technology push. As part of the effort, Gelsinger was eagerly pointing out the geopolitical risks associated with advanced chip manufacturing being concentrated in Taiwan.

Some of his most controversial remarks, which ignited a back and forth with TSMC's outspoken founder, Dr. Morris Chang, were made at the Fortune Brainstorm Tech Conference in Half Moon Bay, California. At the event, Gelsinger commented that "Taiwan is not a stable place" adding that "Does that make you feel more comfortable or less?" Intel and TSMC stressed each other's importance when asked about Gelsinger's comments and TSMC's response.

His remarks weren't well received in Taiwan, with Chang being particularly outspoken. He retorted by stating that Gelsinger was too old to drive meaningful change at Intel and his remarks were aimed at securing subsidies for Intel. Chang also advised Gelsinger to focus on TSMC's weakest aspects if he wanted to compete with the firm, and shared that the executive's comments were from an emotional position which failed to outline how his firm would outpace TSMC in the global semiconductor fabrication industry.

Not only did Gelsinger's comments draw a response from TSMC's executives, but they also soured the relationship between Intel and TSMC. After TSMC withdrew its discount, Intel had to pay the full price for 3 nanometer products which hurt the firm's profit margins. Details that insiders shared with Reuters also note that Gelsinger's public comments for AI chip sales were more optimistic than Intel's internal sales expectations. Intel's troubles also led the firm to cancel a self driving chip deal with Alphabet and pay a fee after being threatened with legal action.

Intel and Alphabet declined to comment on the deal. Reuters also quotes a "recent planning document" from an Intel supplier that hints at potential delays in the firm's 18A process. The publication's sources add that Intel's customers don't believe 18A will be ready for high volume production by 2026. Qualcomm and Apple have also purportedly declined to use the technology due to technical concerns. However, Intel still assured in its statement that 18A would be launched next year to allow it to reclaim process leadership.

Intel CEO Lost A 40% Discount For TSMC's Latest Chip Tech After Taiwan Remarks - Report

Intel CEO Patrick Gelsinger's remarks about TSMC's Taiwan risk jeopardized a hefty discount that TSMC had offered the firm, says report.

wccftech.com

 

[Xebec]

Is this real news or Reuters quoting questionable sources again?

If the agreement is signed, how does TSMC back out of the pricing?

 

[tonyget]

Is this real news or Reuters quoting questionable sources again?

If the agreement is signed, how does TSMC back out of the pricing?

I think the agreement only covers certain batches of wafer or certain time period. After it expires，if Intel wants to sign new deal with TSMC，they won't get discount then

 

[kevin01]

It is very questionable. Tsmc gross margin is 55%-ish. It would not give anyone (including apple) a discount of 40% on a sustainable basis.

 

[blueone]

I like the quote from the article that Morris thinks Pat is too old to drive meaningful change at Intel. I can't believe he said that.

 

[tedc]

I like the quote from the article that Morris thinks Pat is too old to drive meaningful change at Intel. I can't believe he said that.

Think this was referencing Intel's own rules that require corporate executives retire at 65. They got rid of the rule when Pat re-joined Intel. (Pat is currently 63 years old.)

 

[blueone]

Think this was referencing Intel's own rules that require corporate executives retire at 65. They got rid of the rule when Pat re-joined Intel. (Pat is currently 63 years old.)

That rule has been meaningless for a long time. For example, Andy Bryant served as Chairman of the BoD until he was 70. Craig Barrett also served as Chairman until he was 70. I also find it amusing that Chang is so silly that he thinks meaningful change at Intel will take longer than Pat's likely tenure. Intel probably almost certainly doesn't have longer that.

I was not enthused when Pat was appointed. I didn't think he was the right person for the job, and unfortunately many of his actions since then have supported my contention. And it has nothing to do with his age.

 

[Daniel Nenni]

Is this real news or Reuters quoting questionable sources again?

If the agreement is signed, how does TSMC back out of the pricing?

Fake news.

Best quote "Intel’s revenue shriveled to $54 billion in 2023" Shriveled...

First of all, Apple has a most favored nation contract with TSMC meaning TSMC cannot sell comparable wafers for less than Apple pays. Second, these wafer agreements are volume based. If Intel doesn't do the volume they have to pay. Third, Intel will not buy more wafers than Apple, not even close. I doubt Intel is even TSMC's second largest customer and certainly not first.

From what I heard Bob Swan signed a big contract with TSMC that was very favorable to TSMC with a big prepay. Pat G renegotiated it for lower volumes to get more inhouse wafers made at Intel 3 and 18A and adjust for shriveled revenue.

When Apple first signed with TSMC media idiots said Apple would crush TSMC as it had other supply partners. Apple stated publicly at a TSMC event that I attended that the TSMC relationship was critical for Apple and it would be a win-win partnership and it has been without question. This was 10+ years ago (iPhone 6) and I would definitely say that the Apple TSMC relationship has been a win-win. In fact, it has been industry changing and the main reason why TSMC is now in the process lead. Apple pushed TSMC for a new process every year and that is now the industry cadence.

This is a nothing burger. Bashing TSMC for clicks.

 

[MKWVentures]

TSMC gets 10BiIlion+ in annual revenue from Intel AND pokes Intel in the eye LOL... Intel had a good deal negotiated with TSMC before Pat got there.... but Pat had other ideas. We will see how it works out when the updates are communicated.

Feedback in July was that 18A PDK 1.0 was both late and had issues (Not sure what issues). Lets see what Intel says about the process roadmap changes today.