Intel Corp.’s decided to outsource the manufacturing of semiconductors. The company was based in Santa Clara, California. This decision ends an era of dominance of the company and the US in the semiconductor industry. The decision can undoubtedly influence global trade and geopolitics. Intel’s chips are extensively used in computers. And also by data centers that support the design of nuclear power stations, spacecraft, and jets that help governments to quickly understand intelligence and other crucial information.
Reason behind Intel’s decision
Intel had been the leading manufacturer of chips for several decades. However, the rise of smartphones and other mobile devices changed the scenario. When smartphone sales took off, phone makers used other processors from companies like Qualcomm Inc. or they designed their own, like Apple Inc. Intel started the manufacturing of mobile chips. However, preference, and priority was given to existing PC and server chip businesses.
Over the years, Intel has spent tens of billions of dollars updating its factories, and the company was always ahead of the rest of the industry. While most US chip companies shut down their plants years ago, Intel held out. But now, the company’s factories are struggling to keep up with the latest 7-nanometer production process.
Bob Swan, the Chief Executive Officer declared that Intel is considering outsourcing. He added the place of manufacturing is not important. However, since then, the company’s shares slumped 16%.
What is next?
If the decision materializes, production would likely go to Taiwan Semiconductor Manufacturing Co., which focuses on production and is currently the world leader. The company is based in Hsinchu, one of the closest Taiwanese cities to China. TSMC produces more than a billion chips annually. Given the experience, they can overtake their Intel counterparts in technical execution.
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