Intel says the production of its next-generation chips will be set back until 2022, following years of delays getting its current-generation chips on sale.
The company said it was exploring “contingency plans” such as having third-party manufacturers produce some of its products.
In June, Apple said it would transition its Mac computers away from Intel processors and design its own chips.
One expert said Intel risked leaving a gap for competitors to step into.
Intel said it had identified a “defect” in its manufacturing process that led to the new delay.
The Santa Clara, California-based company has been the largest chipmaker for most of the past 30 years by combining the best designs with cutting-edge factories, several of which are still based in the U.S.
Most other U.S. chip companies shut or sold domestic plants years ago, and had other firms make the components, mostly in Asia. Intel held out, arguing that doing both improved each side of its operation and created better semiconductors. That strategy is in tatters now, with the company’s factories struggling to keep up with the latest 7-nanometer production process.
After Chief Executive Officer Bob Swan said Intel is considering outsourcing, the company’s shares slumped 16% on Friday, the most since March, when the stock market plummeted in the early days of the Covid-19 pandemic.
“We view the roadmap missteps to be a stunning failure for a company once known for flawless execution, and could well represent the end of Intel’s computing dominance,” Chris Caso, an analyst at Raymond James, wrote in a research note on Friday.
Intel’s Xeon chips run computers and data centers that support the design of nuclear power stations, spacecraft and jets, while helping governments quickly understand intelligence and other crucial information.
Many of these processors are made at facilities in Oregon, Arizona and New Mexico. If Intel outsources this work, it would likely be done by Taiwan Semiconductor Manufacturing Co., which focuses on production and is currently the world leader. It’s based in Hsinchu, one of the closest Taiwanese cities to China, which considers the Asian island a rogue province rather than an independent country.
“With the latest push out of process technology, we believe that Intel has zero-to-no chance of catching or surpassing TSMC at least for the next half decade, if not ever,” Susquehanna analyst Chris Rolland wrote in a research note. He thinks Intel should sell its plants to TSMC, although he says that’s unlikely.
Swan said on Friday that Intel’s products are still the best, despite the manufacturing delays. But by opening the door to outsourcing, the CEO endangers one of the last bastions of U.S. technology leadership.
“By outsourcing leading edge technology, presumably to TSMC, Intel would give up what has been its main source of competitive advantage for 50 years,” Caso of Raymond James said.