In a bit of a freak move by Intel they have announced that they will be partially outsourcing the fabrication of one of its CPUs to a TSMC.
This is the first time in history that Intel have outsourced their production and is to be the start of a long-term, "strategic" collaboration in which Atom IP will be ported to TSMC's manufacturing process, with the Taiwanese foundry fabricating Atoms for some customers.
According to Intel:
It is a long-term collaboration. It is not about capacity. It's a strategic relationship that allows us to expand the growth opportunities for both companies
This relationship between us and TSMC is strategic in nature; it's the first time we've ported a processor externally outside of an Intel process.
So it it is not due to the exponential growth in demand for the Atom CPU it must be about saving a few pennies!
Considering Intel are investing $7 billion in the US for building four 32nm fabrication plants I can’t really blame them for trying to find ways to save money
Ars Technica reported that:
Intel's margins on Atom are much thinner than those on regular desktop and server CPUs, and with each process shrink, Atom's cost (and price) will go down. But fabs get more expensive with each shrink, so the result is that Intel has to sell many more Atoms at 32nm than it does at 45nm to make money. The demand for all of those Atoms may or may not materialize, which is why Intel will pay TSMC to fab them and share the risk that the demand may not be there. Meanwhile, Intel wants to save its (very costly) in-house fab capacity for high-margin products, like its CPUs.
The main problem facing Intel is that, right now, nobody wants high-margin, high-performance CPUs. The demand is there for the cheap stuff, but Intel would rather not take the risk that this appetite for cheap will continue to balloon by turning even more of its premium in-house fab capacity to the task of cranking out Atoms. Better to dedicate the costly new 32nm fabs to producing high-margin CPUs on the hopes that demand for performance will eventually recover, while letting TSMC's fabs support any further growth in the Atom market.