PALO ALTO, U.S. -- Intel said on Thursday that it will likely expand its production outsourcing of chip products over the next few years as the company reported record annual earnings for 2020.
The U.S. chip giant has been under increasing pressure to outsource production to foundries such as its longtime partner Taiwan Semiconductor Manufacturing Co. after the company ran into delays introducing its own 7-nanometer chip manufacturing technology.
"I am confident that the majority of our 2023 products will be manufactured internally. At the same time, given the breadth of our portfolio, it's likely that we will expand our use of external foundries for certain technologies and products," incoming Intel CEO Pat Gelsinger said on Thursday.
Bob Swan, Intel's current CEO, said external foundry partners can "play a larger role" in the production of its next-generation CPU, which is set to be rolled out in 2023. The final manufacturing decision for the 2023 product lineup will be made by Gelsinger, an industry veteran and former Intel CTO who will take over from Swan on Feb. 15.
Until now, Intel has designed and manufactured the bulk of its most important products in-house, a strategy that helped it dominate U.S. chipmaking for nearly 50 years. But delays in rolling out its own latest chip production technologies to match the rise of Asian chipmaking giants like TSMC and Samsung Electronics, have weighed on Intel's market share in recent years.
For 2020, Intel posted record annual sales of $77.9 billion, up from $72 billion in 2019, exceeding analysts' expectations. However, its shares dropped nearly 5% in after-hours trading, after the company announced plans to outsource more chip production and delayed the announcement of its 2021 full-year outlook.
Results for the December quarter also hit a record, with sales of $20 billion, thanks to pandemic-driven demand for personal computers and chips.
Amid struggles with production delays, Intel has come under mounting pressure from newcomers such as Nvidia and AMD, especially in the lucrative 5G chip and data center businesses. Intel's main competitors typically contract with external foundries to manufacture their designs.
Nikkei Asia previously reported that Intel is in talks for at least five projects with TSMC with a view to outsourcing production of some of its flagship processors for a wide range of devices, including laptops, servers and edge-computing devices, to the world's biggest contract chipmaker.
Intel is already a longtime TSMC customer, having outsourced production of some graphics processors, modems, AI accelerators and other peripheral chips to the Taiwanese contract chipmaker. However, if the two companies reach a deal for these five projects, it would be the first time that Intel decided to outsource such a wide range of key processor products.
The company has also been in talks with another Asian chipmaker, Samsung Electronics, for chip production.
