Intel To Temporarily Outsource More Chip Production To TSMC As Part Of Cost-Cutting Measures

US chip giant Intel is reportedly planning to temporarily outsource more chip production to its Taiwanese rival TSMC as part of the company's overall cost-cutting measures.

The US chipmaker plans to layoff more than 16,000 staff, or at least 15 percent of its workforce, with most cuts coming by the end of the year as the x86 giant scrambles to get its finances under control.

In the company's second quarter earnings report on Thursday (1 August), Intel CFO David Zinsner said that the company was taking "proactive steps" by implementing "spending reductions" to improve profits and strengthen its balance sheet.

"We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders," Zinsner added.

According to reports, Intel is likely to reduce headcount by greater than 15 percent with the majority completed by the end of 2024.

The company will also cut capital expenditures by more than 20 percent to between $25 billion and $27 billion in 2024 now that it's achieved its goal of five process nodes in four years.

It also plans to cut cap-ex spend back further in 2025 to $20 billion to $23 billion.

The cuts comes on top of a dismal three months for Intel, which racked up $1.6 billion in losses on revenues that fell one percent to $12.8 billion in its second quarter. This time last year, the company recorded a $1.5 billion profit for Q2.

"Profitability was disappointing despite continued progress on product and process roadmaps with our new operating model firmly in place," Intel CEO Pat Gelsinger said on Thursday's earnings call. 

However, Intel Foundry – the division that manufactures chips not just for Intel but for customers from their own blueprints on a contract basis – showed some signs of recovery with revenues up four percent year-on-year in Q2 to $4.3 billion.

In a bid to drive its spending down, Intel is likely to outsource production of more chips traditionally built on its internal process tech to TSMC. This will include its Lunar Lake mobile chips due out on 3 September.

And this outsourcing of fabrication to the rival factory is expected to continue through much of 2025 before product returns home in 2026, Gelsinger explained on the call, The Register reported.

This implies that Intel plans to use TSMC as a stop gap arrangement while it gets its internal 20A and 18A processes ready for volume production.

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