Here's why Intel's Foundry Services is a brilliant strategic gambit
What's the story
It's no secret that Intel is in dire straits after being bested by AMD and recently losing its chip contract for Apple's Mac range. It will now focus on making chips for other companies. Intel is primarily committed to manufacturing products for its own brand, but that strategy sees a major shift with the foundation of the independent business unit dubbed Intel Foundry Services.
Silicon mercenary
Intel Foundry Services will independently manufacture chips for third parties
Processors, SoCs, and other chips are manufactured in units called foundries. Intel Foundry Services is named so because of its focus on manufacturing chips for third parties. The restructuring comes after Intel's failures to transition from 14nm to finer chip 10nm lithography node. Meanwhile, AMD has leveraged Taiwan Semiconductor Manufacturing Company (TSMC)'s 7nm process to beat Intel in virtually every aspect of high-performance computing.
Building trust
Why float an independent business unit to manufacture chips?
When TSMC manufactures chips for, say, NVIDIA and AMD under the same roof, both companies trust TSMC to not leak their semiconductor design secrets to rivals. That's also why AMD will be unwilling to have its chips manufactured at rival Intel's foundries. However, Intel Foundry Services is deliberately floated as an independent business unit to build the same sort of trust that TSMC enjoys.
Smart move
Intel's preparing for China taking world's semiconductor supply by force
Intel's business decision is strategically sound considering recent geopolitical developments. The Tiny island nation of Taiwan is largely responsible for the world's semiconductor supply. Strategic analysts predict China will usurp Taiwan in the next five years. This isn't helped by the US losing every single simulated war game with China over Taiwan, owing to Chinese air defense and the ease of striking nearby US bases.
Strategic foresight
Intel Foundry Services will be needed when Taiwan falls
Intel has been one of the few tech firms that is self-reliant when it comes to semiconductor manufacturing. Everyone from Apple and AMD to NVIDIA and Qualcomm depend on TSMC for their chip supply. Setting up an independent division to manufacture chips for third parties could be Intel anticipating the impending fall of Taiwan to capture the inevitable surge in demand.
R&D failure
Intel faces serious technical challenges before it can replace TSMC
However, Intel has a long way to go before it can match TSMC and Samsung in semiconductor fabrication technology. Both of its competitors have successfully transitioned to the finer and more advanced 7nm lithography process, which allows them to cram more transistors on smaller chips, thereby increasing performance as well as efficiency. Meanwhile Intel is still stuck in the 14nm process node.