Outsourcing cost
As we informed you earlier, Intel will be making a joint strategic announcement with TSMC later today.
While Intel is offering no details of what will be discussed, sources told us late last night that it will involve outsourcing the manufacture of Atom processors to TSMC. It seems Intel has calculated that TSMC can manufacture Atom chips more cheaply than it can itself.
But the question remains, why? Here are some possibilities:
Saving money
- This is somewhat counter-intuitive as Intel continues to invest billions of dollars in its own manufacturing capacity precisely so it doesn't have to outsource. However, if TSMC is offering to make Atom cheaply enough, there may be a financial advantage to doing just that.
Freeing up its own manufacturing capacity
- Atom is a low cost part and Intel only has a finite manufacturing capacity. Manufacturing resources devoted to Atom aren't being used to make more expensive and presumably more profitable parts.
- Again this is slightly counter-intuitive as, by Intel's own admission, the global recession has led to higher factory underutilisation. If this is the reason, Intel must be planning a serious manufacturing push in the near future.
Supporting TSMC
- Intel's great CPU rival AMD is spinning off its manufacturing operations into a new company called The Foundry Company (TFC), which is free to compete with TSMC for outsourced semiconductor manufacturing. Intel may consider it desirable to ensure TSMC has enough ongoing business to enable it to compete rigorously with TFC