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Anonymous Customer Pre-Paying for 18A (1.8nm) Production Provides Intel with a Confidence Boost

Recently, Intel CEO Pat Gelsinger reaffirmed his objective for Intel to surpass TSMC as the leader in the foundry industry by 2025. Gelsinger stated, “We’re 2.5 years into the transformation. Now, it’s sort of gone the way I would have expected at the time in terms of rebuilding the company. You have to be much less skeptical about our ability to pull this off.” Intel not only lost its foundry leadership to TSMC, but it also witnessed Apple, TSMC’s largest customer, replace Intel chips with M-series chips manufactured by TSMC.

During the Deutsche Bank conference last week, Gelsinger indicated that Intel’s 18A node would restore process leadership to the company. This node would be equivalent to 1.8nm, while TSMC and Samsung are expected to ship at 2nm during the same period. The CEO also shared that Intel has received a significant prepayment from a customer for Intel’s 18A capacity. This has given Intel the confidence to accelerate the development of 18A fabs.

In the long term, Intel sees the contract foundry business as its biggest opportunity. Gelsinger made an interesting comment, stating that Intel is aware of TSMC’s wafer costs, ASPs, and targets. With this knowledge, he aims for Intel to have lower costs than TSMC in order to win business from the global foundry leader. Intel intends to align its internal cost structure with TSMC by studying metrics such as headcount per wafer start and implementing more AI/Machine Learning to enhance efficiency.

While Intel continues to rely on TSMC for certain aspects of its next-generation ‘Meteor Lake’ chips, such as the GPU tile and the chip’s SoC tile, it is using its own Intel 4 node (7nm) to build the CPU tile. This has raised eyebrows among industry observers, as Intel is purchasing components from TSMC for its own products while promoting its foundry services to third parties.

The questions of whether Intel will disrupt TSMC and Samsung Foundry, if Apple will remain loyal to TSMC, and if geopolitical tensions will prompt TSMC customers to seek alternatives, are yet to be answered.

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