We reported earlier this year that Intel could pick Samsung as a contract manufacturer of its 14nm Rocket Lake PC CPUs. It was said back then that negotiations between the two companies were in the final stages.
It appears that a deal has been struck between the two titans of the industry. Local media in South Korea is now reporting that Samsung has indeed won orders from Intel for its 14nm chips. Intel has been looking for a contract manufacturer for some time now as it struggles to keep up with demand.
Intel's supply struggles are Samsung's gain
Intel has been struggling with a 14nm CPU supply shortage since the second half of last year. Things got so bad that Intel's EVP Michelle Johnston Holthaus even apologized for the shortage in a letter last week, saying that the market growth in PCs this year has “outpaced our efforts.” Intel also said that it has increased the use of contract manufacturers to boost its PC CPU output by double digits.
One of the reasons why Intel is facing this problem is because it's heavily invested in setting up new lines and upgrading existing ones for 10nm chip production. However, it's going to be a few years before Intel can scale them up. In the meantime, Intel has to continue selling chips in the market so it has to keep up 14nm production yields. So it has to offset some production to contract manufacturers.
There aren't a lot of players in the foundry market. Taiwan's TSMC and Samsung Electronics are among the two biggest players. Intel was reportedly wary to go with TSMC as it supplies AMD, the company's biggest rival. That may just be one of the reasons why Samsung has been chosen for 14nm PC CPU production. It's also big enough to meet Intel's demand and that would likely have been another reason.
Samsung stands to gain a lot from this arrangement. The company has been trying to find new growth engines as its earnings from the memory market take a hit. The company is also going to invest more than $100 billion in non-memory chips through 2030. It's even expected to manufacture Qualcomm's next Snapdragon 865 chipset.
It's unlikely that this arrangement between Samsung and Intel will be officially confirmed in the media. Such business-to-business arrangements rarely are. However, with TSMC out of the running, because AMD is having all of its 7nm CPU and GPU parts produced there, Samsung appears to be the only logical option for Intel. If Korean media is to be believed, Samsung has already locked in the orders from Intel.
