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(Bloomberg) – Investors want to know one thing when Intel Corp. will publish its results on Thursday: will the world’s largest chipmaker outsource more production? We may already have an answer, judging by recent comments from other parts of the industry.
ASML Holdings NV, a key supplier of chip-making equipment, on Tuesday said it was shifting orders for some of its more advanced machines from one customer to another. He didn’t say who, but the company was probably referring to orders from Intel to other chipmakers, such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.
These two companies produce semiconductors for others. If Intel outsourced more, it would require fewer ASML machines, while TSMC and Samsung would need more hardware to handle the extra work.
Intel will likely address its manufacturing strategy after releasing its fourth quarter results. Investors and analysts criticized the company for falling behind and not presenting a concrete plan in previous earnings reports.
“Beyond the financial aspects, investors will be looking for more clarity on Intel’s long-term strategy and manufacturing game plan,” wrote Christopher Rolland, analyst at Susquehanna Financial Group, in a recent research note. “We would be encouraged if the plan included the outsourcing of at least some of the major PC / server products.”
Last week, TSMC dropped more clues. He unveiled plans to increase capital spending for 2021 to $ 28 billion, a record and a huge jump from $ 17.2 billion in 2020. This has fueled speculation that the capacity – machines ASML and other equipment – in place to meet large orders from Intel.
Executives at the Taiwanese company declined to comment on customers. However, Intel has spoken with TSMC and Samsung about Asian companies making some of its best chips, Bloomberg recently reported.
Learn more about Intel’s discussions with TSMC and Samsung here.
TSMC and Samsung have production technology that is now more advanced than Intel, which has always made its best products in-house and previously led the industry. Manufacturing is one of the key factors in making chips that can process information faster, store more data, and use less electricity.
Intel might not give its final answer on Thursday, however. The company has just replaced CEO Bob Swan with former executive Pat Gelsinger, who will take over next month. Swan has said he will announce if he will outsource production, and by how much, in the first quarter, but Gelsinger may need more time to develop his own strategy.
As investors focus on Intel’s future plans, it has racked up record revenue on demand for personal computers as a large portion of the population works and studies from home. The growing use of cloud services has also boosted sales of its Xeon server chips, which are the core of data centers run by companies such as Google and Amazon.com Inc.
When announcing Gelsinger’s appointment, Intel said fourth-quarter profits would exceed expectations and had made “big progress” on its latest manufacturing process, known as 7 nanometers. In July, Intel shares fell 16% when the company warned the technology would be a year behind schedule.
Analysts expect Intel revenue to fall 13% in the fourth quarter to $ 17.5 billion and see sales drop 18% year-over-year to 16, $ 18 billion in the current period. For 2021, sales are expected to fall 7%, the first annual contraction since 2015, according to average analyst estimates compiled by Bloomberg.
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