To remain competitive, Intel plans to become a chip supplier rivaling TSMC and Samsung. This move could have big implications for the semiconductor industry as it could change the relationships between Intel, TSMC and Samsung.
To better understand the impact of Intel’s plans, this article will discuss how Intel plans to compete with these two semiconductor giants and what it means for the industry as a whole.
Overview of Intel’s plans
Investors and industry watchers have closely followed Intel’s plans to expand its data center and PC businesses. At its October 2020 investor meeting, Intel announced plans to increase capital equipment spending from approximately $14 billion in 2021 to $25 billion in 2023. This investment is expected to significantly improve the competitiveness of Intel products, reduce its dependence on third parties. party suppliers and reduce costs.
The move has a significant impact on Intel’s competitors, particularly those chipmakers that rely heavily on foundry services provided by companies such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics. However, while many analysts expect the two companies’ profits to shrink due to increased competition from Intel in both markets, some also believe that the long-term opportunities may outweigh any short-term disruption.
In particular, TSMC and Samsung may benefit if Intel develops expertise or technology that requires extensive tracking services. These could include chip design assistance or wafer supply agreements, services that TSMC and Samsung already offer to customers beyond the scope of foundry services for pure chip manufacturing. Moreover, China may also present attractive opportunities for these two players in the medium to long term by narrowing its performance gap with more advanced markets such as the US.
How Intel plans to rival TSMC and Samsung as a chip supplier
Intel’s new plans to become the leading supplier of chips for technology companies could have a major impact on current market leaders TSMC and Samsung. Intel’s plans to develop 5nm chips, which are currently only made by the two companies above, could seriously blow up their dominance in the market.
It is important to analyze the potential effects of Intel’s plans on TSMC and Samsung.
Impact on TSMC
Intel’s move to outsource more of its production to a third-party chip maker like Taiwan Semiconductor Manufacturing Company (TSMC) has the potential to significantly affect the global chip manufacturing landscape. Intel currently produces its CPUs, but its plans to shift production of 14-nanometer and larger chips to TSMC could dramatically change the industry’s competitive dynamics.
By moving most of its production needs off-site, Intel is freed from costly investments in new manufacturing plants or costly upgrades to existing ones. The move could also potentially increase manufacturing flexibility and reduce costs through economies of scale units at TSMC. However, this change will likely leave relatively few winners, with Samsung and TSMC claiming those top spots.
For TSMC, it means a potentially large influx of new customers attracted by its low prices and great ability to produce high-performance chips. It also allows TSMC to spread its technology roadmap to better compete with Intel in future designs and process nodes that would otherwise be inaccessible without an x86 CPU vendor. Similarly, Samsung may experience similar growth due to Intel’s decision, as it also has a growing focus on chipmaking services beyond TV screens and mobile devices. In doing so, Samsung will look to capitalize on more customized products, such as modem chipsets for 5G networks available through design houses such as Qualcomm Technologies Inc.
Impact on Samsung
Intel’s decision to outsource some of its most power-hungry chips has significantly affected both TSMC and Samsung, two major companies that supply chips to the CPU giant. While Intel’s choice to outsource its production to third parties has led to a decline in revenue for both companies, the financial consequences have been seen at different levels.
TSMC has seen only a minimal decline in profits due to the company’s diversified product portfolio. As a result, over the course of 2020, while TSMC’s sales declined by roughly 4%, its market share rose from 56% to 60%. Samsung, on the other hand, wasn’t so lucky: As Intel pushed ahead with its plans, Samsung saw its market share drop from 16% in 2019 to 12.5%.
The effects spurred by Intel’s options were particularly evident in the second quarter of 2020, when Samsung reported revenue roughly 30% lower than TSMC’s. These financial declines would have been even more drastic if Apple had not spread orders between the two fabless chipmakers in a reasonable manner. Since then, TSMC’s 5nm process capacity utilization rate is currently around 100%, while Samsung’s 6nm capacity utilization rate is around 70% %.
In general, it can be assumed that Intel’s decisions will affect the results of these two companies differently throughout 2021 and beyond. While TSMC may continue its dominance among CPU market players in the coming year, it remains to be seen how much influence this trend will have on Samsung within the semiconductor space.
Counter strategies
Intel announced plans to challenge TSMC and Samsung’s dominance of the semiconductor market. Both companies have implemented strategies to counter Intel’s incursion, including investing in advanced technologies, strengthening their supply chain and increasing marketing activities.
Let’s take a closer look at the strategies Samsung and TSMC have used to respond to Intel’s plans.
TSMC Counterstrategies
In response to Intel’s growing efforts to manufacture semiconductor chips, Taiwan-based TSMC (Taiwan Semiconductor Manufacturing Co.) and South Korea-based Samsung have developed strategies to compete with Intel in the semiconductor manufacturing space. chips
TSMC has deployed several counter strategies to combat the pressure of increased output capabilities from Intel. One such strategy is to invest heavily in research and development to stay ahead of Intel’s technological advances. This includes investing in new technologies and forming partnerships with leading companies such as Apple, Qualcomm and Nvidia to access their design know-how.
Another counter strategy adopted by TSMC is the increasing use of extreme ultraviolet (EUV) lithography, a technology that maximizes performance while minimizing costs. By leveraging this technology, TSMC will be able to produce smaller chips with higher performance and better energy efficiency, an advantage over Intel, which still relies on optical lithography for its chip production process.
TSMC has also secured deals from several companies, including Mozilla and Xilinx, committing them to use TSMC chips instead of Intel chips, an indication that many customers value quality over quantity when it comes to chipsets. This move not only serves as a sign of confidence towards TSMC, but also strengthens its position as a viable alternative for chip manufacturing compared to Intel.
Samsung’s counter-strategies
As Intel becomes a leader in chip manufacturing, Samsung has faced increasing competition for its market share. But the company is adapting its strategies to meet this challenge.
Samsung has focused much of its attention on the development of innovative new products in the System-on-Chip industry. For example, the company recently opened a new facility in Korea that focuses on components for the automotive industry, emphasizing chip solutions for vehicle sensors, wireless connectivity and AI computer vision .
Samsung has also been leveraging its extensive foundry capabilities to attract more customers from the fast-growing 5G equipment supplier market. In addition, the company has begun offering custom-designed packaging services using advanced processes such as 2D and 3D stacking for faster integration speeds and smaller physical area designs essential for 5G communications products high performance
In addition to these initiatives, Samsung continues to strengthen its lead in premium markets with cutting-edge technology, including High Bandwidth Memory (HBM). HBM provides up to 4x bandwidth over GDDR5, delivering greater bandwidth-per-watt efficiency amid increasingly power-hungry processors due to increased feature integration.
All this has meant that Samsung’s revenue from high-performance chips such as mobile image signal processor (ISP), network processing units (NPU) and mobile display drivers have been steadily increasing every year despite intensifying competition from cash-burning rivals like Intel. Indeed, many investors see Samsung’s position as advantageous given Intel’s late start in contract manufacturing compared to TSMC and Samsung’s decades of experience. Going forward, it’s still unclear how well Intel will balance its efforts between in-house hardware development and outsourced chip manufacturing through external foundries like TSMC and GlobalFoundries/Samsung, but it’s certain that this competitive landscape will require constant adaptations of all parties involved.
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