Intel likely to outsource chip production to Taiwan's TSMC than S. Korea's Samsung: insiders

Industry insiders believe that Intel would pick Taiwan's TSMC over South Korea's Samsung Electronics to produce its 7-nm chips due to security issues.

TSMC is not engaged in semiconductor design, giving it an advantage over Samsung, which is a major competitor of Intel in chip designing.

Furthermore, Intel’s discussion with Samsung Electronics is still in the preliminary stage compared with that with TSMC.

However, TSMC’s production lines are already full.

Intel is expected to outsource the production of core semiconductor chips to South Korea's Samsung Electronics or Taiwan's TSMC as it seeks to regain control of the market by separating semiconductor design and manufacturing.

Intel has been losing ground against competitor AMD, lagging in the development of 7-nm chips.

AMD is already producing 7-nm chips, while Intel had to delay production for six months due to low yields.

Intel CEO Bob Swan suggested last year that it may outsource its 7-nm chip production.

A US activist hedge fund known to hold Intel shares worth about US$1 billion called for a strategic alternative as Intel was lagging behind TSMC and Samsung Electronics in chip manufacturing technologies.

The hedge fund said Intel should rethink its business model from design and development to manufacturing.

The Intel deal will enable Samsung Electronics to narrow its gap with TSMC, which enjoyed a 54 percent share against the former's 17 percent.