Intel Says it Fixed 7nm Process, But Will Still Outsource Some Parts

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Intel isn't giving up on making its own chips. The company reported its fourth quarter earnings today, with incoming CEO Pat Gelsinger and Omar Ishrak, Chairman of Intel's board, joining outgoing CEO Bob Swan on the call. Intel posted yet another strong quarter and record year, but the promised update on its 7nm process and outsourcing strategy, which will see the company contract out production of some of its leading-edge products for the first time in its history, hung thick in the air.

Incoming Intel CEO Pat Gelsinger spoke on the call, saying that he has personally reviewed progress on the company's 7nm process over the last week and that he is pleased with the "health and recovery of the 7nm program." Gelsinger also said that, given the breadth of the company's portfolio, Intel will expand its use of external foundries for some products. However, he is confident that the majority of Intel's 2023 CPU products will come from the company's own factories. The company plans to share more details after Gelsinger takes the helm in February.

Notably, the 2023 timeline is still delayed relative to Intel's original timeline for its 7nm process, but is in line with the six-month delay the company outlined when it announced that its 7nm process was broken. Gelsinger noted that while his cursory 7nm investigation took place over the last week, it's based on data collected over the last six months as Intel investigated the yield issues.

Intel CEO Bob Swan weighed in with more details, saying that the company's yield issues with the 7nm process stemmed from difficulties with a sequence of steps in the company's production process, which introduced defects. "By rearchitecting these steps, we have been able to resolve the defects," Swan said. Swan also said that the company has simplified and streamlined the 7nm process to better ensure that the company can deliver on its 2023 roadmap, implying there may be some significant changes to 7nm's performance and/or design targets.

Intel chips based on the 7nm process will debut in 2023, with client processors coming in the first half and server products following. That timeline still leaves Intel's competitors, like TSMC and Samsung, with a process node advantage in the 2023 time frame. TSMC projects it will be in full production of its 3nm node in 2023, explaining Intel's continued need to outsource some products. Intel plans to leverage its packaging technology and disaggregated design philosophy to integrate externally-produced chips into its own products.

Gelsinger also said the company remains committed to re-establishing its lead in process node technology, saying he's "not interested in closing the gaps...but being the unquestioned leader in process technology."

Swan also reiterated the company's commitment to preserving its IDM advantage, echoing his comments in our recent interview, meaning the company will still focus on producing its own chips in-house. Intel's CFO also said the company is increasing its spending on 7nm tooling for internal production.

Gelsinger noted that the company wouldn't share its detailed plans until after he takes the CEO position next month. Gelsinger commented that he will make key leadership changes and that other leaders will come back to the company, much like the news that Glenn Hinton has re-joined Intel.

Gelsinger also commented that "we are committed to innovation and delivering the best products in every market we compete in." Gelsinger says his overhaul of the company will focus on four key areas: Leadership products, 'maniacal execution,' innovation, and restoring the "transparent, data-driven culture" cultivated by former Intel CEO Andy Grove.

The company is also delaying its full-year outlook until its next earnings call. Intel's press release also indicates that the company has quadrupled its '10nm supply unit growth', which has long been plagued by low yields, but didn't provide a frame of reference as to how much actual 10nm volume is in production.