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Intel CEO Patrick Gelsinger's comments about the Taiwan Semiconductor Manufacturing Company's (TSMC) manufacturing presence in China soured relations between the two firms and eventually led to Intel missing out on key discounts offered by TSMC, according to a fresh report from Reuters. Intel is currently focusing on manufacturing chips with its 18A manufacturing process, and Reuters' report shares that before Gelsinger's comments, TSMC was offering Intel a whopping 40% discount for its 3 nanometer process manufacturing family. However, the Taiwanese firm decided to withdraw the offer following Gelsinger's remarks.
Intel CEO's Remarks About TSMC's Taiwan Risk Soured Relations Between Two Companies
Ever since Gelsinger took over the helm at Intel, the firm has focused on reestablishing its manufacturing technology leadership in the global chip manufacturing industry and setting up a contract manufacturing division to compete with TSMC. At the same time, Intel is also working with TSMC to outsource some of its production needs to the Taiwanese firm.
As per Reuters, in 2021, TSMC had offered Intel a stunning 40% discount for the 3 nanometer technology. Back then, 3 nanometers was TSMC's leading edge chip manufacturing process. One wafer cost $23,000 back then, and TSMC had offered Intel a 40% discount to bring the price to roughly $14,000.
However, back then, Intel was moving full speed ahead to attract US government subsidies for its contract manufacturing and advanced technology push. As part of the effort, Gelsinger was eagerly pointing out the geopolitical risks associated with advanced chip manufacturing being concentrated in Taiwan.
Some of his most controversial remarks, which ignited a back and forth with TSMC's outspoken founder, Dr. Morris Chang, were made at the Fortune Brainstorm Tech Conference in Half Moon Bay, California. At the event, Gelsinger commented that "Taiwan is not a stable place" adding that "Does that make you feel more comfortable or less?" Intel and TSMC stressed each other's importance when asked about Gelsinger's comments and TSMC's response.
His remarks weren't well received in Taiwan, with Chang being particularly outspoken. He retorted by stating that Gelsinger was too old to drive meaningful change at Intel and his remarks were aimed at securing subsidies for Intel. Chang also advised Gelsinger to focus on TSMC's weakest aspects if he wanted to compete with the firm, and shared that the executive's comments were from an emotional position which failed to outline how his firm would outpace TSMC in the global semiconductor fabrication industry.
Not only did Gelsinger's comments draw a response from TSMC's executives, but they also soured the relationship between Intel and TSMC. After TSMC withdrew its discount, Intel had to pay the full price for 3 nanometer products which hurt the firm's profit margins. Details that insiders shared with Reuters also note that Gelsinger's public comments for AI chip sales were more optimistic than Intel's internal sales expectations. Intel's troubles also led the firm to cancel a self driving chip deal with Alphabet and pay a fee after being threatened with legal action.
Intel and Alphabet declined to comment on the deal. Reuters also quotes a "recent planning document" from an Intel supplier that hints at potential delays in the firm's 18A process. The publication's sources add that Intel's customers don't believe 18A will be ready for high volume production by 2026. Qualcomm and Apple have also purportedly declined to use the technology due to technical concerns. However, Intel still assured in its statement that 18A would be launched next year to allow it to reclaim process leadership.
