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Intel Faces Yield Problems in Key 18A Manufacturing Process for Next PC Chip

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Intel’s ambitious push to regain leadership in high-end chip manufacturing has hit a significant hurdle. According to sources familiar with the matter, its next-generation “18A” production process — critical for the upcoming “Panther Lake” laptop chips — is struggling with low yields, raising concerns about profitability and competitiveness against industry leader TSMC.

The 18A process is central to Intel’s strategy of expanding its in-house chipmaking and building a competitive foundry business. Billions have been invested in factories and technology, aiming to close the gap with TSMC. Panther Lake, expected in high volumes in 2025, features next-gen transistors and a more efficient power delivery system.

However, early tests have shown disappointing results. Only a small fraction of chips have met required standards, with yields reportedly around 5% late last year and about 10% by mid-2024. Intel disputes these figures but has not disclosed official numbers. Industry norms suggest profitability usually requires yields between 70% and 80%. Without major improvements by the planned Q4 launch, Intel may face selling chips at reduced margins or even at a loss.

Intel CFO David Zinsner acknowledged yields “start off low and improve over time” and stressed that the product remains “fully on track.” Still, sources describe the 18A rollout as risky, likening it to a “Hail Mary” due to the simultaneous introduction of multiple untested technologies.

Compounding the challenge, defect rates per chip area are reportedly about three times higher than acceptable for mass production. While Intel is working to improve yields monthly, margins are not yet favorable even at current levels. The company has warned that without securing external business for 14A — the successor to 18A — it could exit advanced manufacturing altogether.

For now, Intel still relies partly on TSMC for some in-house designs. Its follow-up to Panther Lake, “Nova Lake,” is also expected to be produced partly by TSMC.

Nvidia’s Planned Major Expansion in Israel Sparks Wide Interest from Potential Sites

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Nvidia, the world’s leading AI chipmaker and the first company to reach a $4 trillion valuation, is seeking to dramatically expand its operations in Israel to meet surging demand for AI data centers. The Santa Clara-based firm issued a request for information (RFI) this week to acquire land for a new campus near its existing facility in northern Israel, with the project expected to cost billions and generate thousands of jobs, according to multiple sources.

Nvidia entered the Israeli market in 2020 by acquiring Mellanox Technologies for nearly $7 billion. Its existing site is located in Yokne’am, a technology hub near Haifa. Nvidia declined to comment beyond confirming the RFI request.

One source, speaking anonymously, revealed that the company has received “dozens and dozens and dozens” of site offers from municipalities and other entities, many not near Haifa, reflecting broad local enthusiasm to host the expansion. The deadline for offers is July 23, with Nvidia planning a campus covering up to 180,000 square meters.

The Haifa municipality stated it is preparing a competitive offer, asserting it has the “best potential” for Nvidia’s new campus.

The planned expansion reflects a broader race among tech giants such as Microsoft, Amazon, Meta, Alphabet, and Tesla to build AI data centers and capture leadership in emerging AI technology. This surge is driving increased demand for Nvidia’s advanced processors.

Industry insiders emphasize Israel’s critical role in the AI era, making rapid expansion necessary for Nvidia. Since acquiring Mellanox, Nvidia’s Israeli operations have nearly tripled in size and reportedly contributed $13 billion in revenue last year, though the company has not publicly confirmed this figure.

In addition to acquisitions, Nvidia has built Israel’s most powerful AI supercomputer, which served as a blueprint for Elon Musk’s Colossus supercomputer. The company employs approximately 5,000 people in Israel.

Dror Bin, CEO of the Israel Innovation Authority, described the planned campus as “massive,” potentially housing thousands of employees. He said Nvidia’s expansion signals a long-term commitment and strong confidence in Israel.

Nvidia’s expansion plans contrast with rival Intel, which has been present in Israel since 1974 and employs 9,350 workers but is currently implementing global workforce reductions. Reports suggest a few hundred Intel workers in Israel may be affected, though Intel declined to provide specific numbers.

Intel CEO Considers Major Shift in Foundry Strategy, Focuses on 14A Chipmaking to Compete with TSMC

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Intel’s new CEO Lip-Bu Tan is contemplating a significant change to the company’s contract chip manufacturing business, potentially abandoning the costly 18A process developed under his predecessor to focus on the newer 14A technology. This move aims to better compete with Taiwan Semiconductor Manufacturing Co (TSMC) and attract major clients like Apple and Nvidia, sources familiar with the matter told Reuters.

The 18A process, which Intel invested billions in, is seen as losing appeal among prospective customers. Shifting focus away from it could lead to a substantial financial write-off for Intel, possibly costing hundreds of millions or even billions of dollars. Intel confirmed it would continue producing chips using 18A for its own internal designs, including the “Panther Lake” laptop chips planned for 2025, as well as fulfilling existing contracts with Amazon and Microsoft.

Tan, who took over in March, has quickly moved to cut costs and reshape Intel’s direction amid years of falling behind in chip technology. The 18A process, which features new transistor designs and energy delivery methods, was intended to rival TSMC’s leading-edge technology but is now considered roughly comparable to TSMC’s earlier N3 node.

By emphasizing 14A, Intel hopes to offer a more competitive foundry service and win contracts from major chip designers currently reliant on TSMC’s manufacturing. The company is customizing 14A to client needs and planning a strategic discussion with its board as soon as this month, with a final decision expected in the fall.

Intel’s move reflects the high stakes involved in regaining its manufacturing edge after a difficult period culminating in an $18.8 billion net loss in 2024. Tan has also revamped Intel’s leadership and streamlined management to improve agility.

While the strategy is still forming, the potential pivot marks one of Tan’s boldest efforts to restore Intel’s chipmaking leadership and profitability.