Taiwan Semiconductor Manufacturing Company (TSM) is the overwhelming leader in the foundry market, particularly when it comes to cutting-edge manufacturing processes. For companies like NVIDIA, TSMC's top-tier manufacturing capabilities have been effectively the only game in town for many years.
Intel (INTC -9.20%) is looking to disrupt the foundry market by building a foundry business of its own. While Intel is still well behind TSMC technologically, the company's roadmap calls for a dramatic shift by the start of 2025. Over the next year, Intel is set to launch three new process nodes, with the final Intel 18A node expected to be the best in the industry, or at least on par with what TSMC has to offer.
Intel has won a handful of customers for Intel 18A so far, but converting those commitments to meaningful revenue will take time. And of course, Intel still needs to prove to prospective customers that it can not only launch Intel 18A on time but also that the process can deliver the expected performance and efficiency characteristics.
A quicker path to meaningful revenue for Intel's foundry business will come from advanced-packaging services. The process of packaging a semiconductor following manufacturing is critical, and as chips have become more advanced, packaging techniques have evolved. While traditional-packaging technology will remain widely used for the foreseeable future, advanced-packaging technologies enable 3D-chip stacking and other capabilities that have become increasingly necessary for the most advanced AI, smartphone, PC, and server chips.
A potentially enormous win
Intel disclosed in its fourth-quarter report that it had won a total of five advanced-packaging customers, with the majority of revenue generation set to kick in starting in 2025. A recent rumor suggests that Intel may have recently added another advanced-packaging win.
United Daily News, a Chinese-language publication out of the Philippines, reported last week that NVIDIA had chosen Intel to provide advanced-packaging services for a portion of its AI chip production. TSMC has been struggling to keep up with demand for its own advanced-packaging services, so it would certainly make sense for NVIDIA to seek out other providers.
Intel recently opened a brand new advanced-packaging facility in New Mexico, the result of a $3.5 billion investment. Intel's 3D-packaging technology is called Foveros, and it was first used in high-volume production for Intel's own Meteor Lake laptop CPUs that launched in December.
Getting in the door
For Intel, selling advanced-packaging services for chips manufactured elsewhere has the benefit of acting as an on-ramp into its foundry ecosystem. By choosing Intel, an advanced-packaging customer can become comfortable with that company as a partner and eventually move some manufacturing over to Intel as well.
If this rumor is true, NVIDIA will only be using Intel for advanced packaging, not actual semiconductor production. However, if Intel succeeds in surpassing TSMC technologically in 2025, the company's manufacturing services will become far more appealing to NVIDIA and any other major chip designer. Winning NVIDIA as an advanced-packaging customer would also be a huge vote of confidence in Intel's fledgling foundry business.
As always, unconfirmed reports like this should be taken with a grain of salt. If Intel is indeed joining NVIDIA's supply chain, that would be incredibly good news for Intel's foundry initiative and shareholders holding on tight as Intel invests heavily to take on TSMC.
