[News] Intel CEO’s Missteps Reportedly offended TSMC, Leading to a Canceled 40% Discount

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Ahead of Intel’s upcoming Q3 financial announcement on October 31st, the market has speculated that it may suffer another quarter of revenue decline, while the company might reportedly incur a loss over USD 3 billion this year.

However, the struggling giant might have made a significant misstep as early as three years ago, when Pat Gelsinger took over as Intel’s CEO, and soon damaged the relationship with TSMC by offending the foundry leader, according to an in-depth report by Reuters.

Sweet Deal Canceled upon Bold Remarks

According to the report, Intel used to enjoy a favorable arrangement with TSMC, as the latter was producing chips that Intel could not manufacture in-house. Citing several people familiar with the deal, TSMC was offering Intel substantial discounts.

However, rather than carefully fostering the relationship, Gelsinger made controversial statements, one after another, and strained ties with TSMC by highlighting Taiwan’s delicate situation with China, the report notes.

According to Reuters, TSMC decided to revoke Intel’s discount as a counterattack. Citing sources familiar with the situation, instead of offering approximately 40% off on the $23,000, 3nm wafers used to manufacture Intel’s chips, TSMC now asked Intel to pay the full price. The move significantly shrink Intel’s margins.

To recap, Reuters states that in May 2021, just months after Gelsinger took the throne of Intel’s CEO, he highlighted the ongoing US-China conflict and warned that the industry shouldn’t become too reliant on TSMC. “You don’t want all of your eggs in the basket of a Taiwan fab,” he said, implying that companies need to look for other supplier alternatives.

TSMC certainly does not like the comments. According to a previous report by Wccftech, TSMC founder Morris Chang responded by saying that he was taken aback by Gelsinger’s rudeness towards TSMC when they met back in 2015.

Later that December, Gelsinger further advocated for U.S. investment in domestic chipmakers, stating at a tech conference that Taiwan is not a stable place, according to Reuters.

When asked by Reuters about this previously undisclosed incident, Intel stated that TSMC remains an important partner and that they maintain a “healthy business relationship today.” TSMC also told Reuters that Intel is a valued customer.

Still Lagging behind as 18A Challenges Remain

TSMC founder Morris Chang used to say that Gelsinger’s previous remarks were made from an emotional standpoint, which failed to clarify how Intel intends to surpass TSMC technologically in the years ahead. Now, Intel’s push to reclaim its manufacturing edge through a new chip-production process, known as 18A, has encountered delays and technical hurdles, with some potential clients hesitating to adopt it.

According a previous report by Reuters, Broadcom’s initial tests with Intel’s 18A (1.8nm-class) process did not meet expectations, creating additional pressure on the semiconductor giant’s efforts to catch up with TSMC in the foundry sector.

The report noted that Broadcom tested Intel’s 18A by producing wafers with typical design patterns. However, its engineers and executives were said to be disappointed with the results, regarding the process as “not ready for high-volume production.”

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(Photo credit: Intel)