Intel Corp. dropped the ball. It should today be the world’s biggest semiconductor foundry; not TSMC. This can still change but it will require a radically different vision.
Intel Corp. dropped the ball. It should today be the world’s biggest semiconductor foundry; not TSMC. This can still change but it will require a radically different vision and strategy completely at odds with what CEO Bob Swan outlined last week. The board of directors will also need to intervene.
Intel’s 7nm Delay Presents Opportunity for AMD
An Intel with the right vision should be aiming for TSMC’s wafer foundry crown. An Intel with the right backbone should not be whining about having fallen one or two process technology behind TSMC. It should get back on the horse, mobilize and rearm its engineering workforce and assure investors it has what it takes to restore its technology leadership.
An Intel with the right vision should stop trying to be all things to everyone, promising and striving to deliver products for the data, networking, automotive, AI, etc. markets. Instead, it should remember its founders once abandoned the DRAM market. It should keep the bread-and-butter microprocessor business but open its fabs to everyone.
Intel can defend what it has today but, if it is to remain relevant, the company must fully embrace the foundry model. It should take on TSMC and Samsung and leverage its decades of process technology, deep engineering bench and savvy marketing strengths to restore itself to the top of the market.
The market will support such a stance. Had Intel announced an expanded focus on its foundry operations, its market value wouldn’t have declined double-digit as it did last week when it instead hinted at the possible termination of its process technology efforts. Had Intel chosen the foundry option, shares in TSMC and Samsung would not be surging as they are now; investors knew that Intel, the greatest threat to the two companies, was disarming itself.
The greatest market opportunity in the $430 billion semiconductor world isn’t in the fancy markets of AI, autonomous driving, connectivity, data and networking, industrial, medical, transportation or whatever. It’s in the foundry business, the place where all the “hot” high-tech and electronics companies will converge for the components they need to keep winning.
You need examples? How about this: recently, the U.S. indirectly ordered TSMC to drop Huawei, its second-biggest customer, and the Taiwanese foundry complied. Weeks later the fab space dedicated to Huawei had been taken up by customers on the “waiting list.” TSMC has no extra spot for walk-in customers.
Intel had been advised to expand its foundry business before. I was one of those who thought this could insulate the company from the vagaries of the microprocessor sector and allow it to leverage its great engineering and manufacturing prowess Here are some quotes from articles written as far back as 2007:
Intel has the potential to become more recognized and rewarded for its services as a customized wafer foundry company than simply a vendor of chips to either the traditional PC or mobile device (tablets and smartphones) markets. First, though, it must successfully make that transition. Failure would turn the “greatest asset” that [then CEO] Paul Otellini talked about last week into the greatest millstone around its neck. – Rethinking Intel’s Greatest Asset (EBNonline, Jan. 23, 2013)
The technology edge Intel enjoys could result in the company, within the next decade, becoming a major player in contract wafer manufacturing. The company has a greater chance of dislodging the leading foundries in this market than it probably does in the mobile (tablet) computing and wireless communications markets The strengths – process efficiency and leading-edge/next-generation technology – that Intel deployed so efficiently to sideline competitors in the microprocessor market are the same ones it can rely upon in the foundry sector. – Intel Foundry: Leveraging Process Edge for Profit (Oct. 1, 2013)
It will be at least several years–possibly even a decade–marked by disruptive shifts in end equipment demand, new technologies, rivalries and economic changes before Intel’s vulnerability to the computing industry becomes a crippling problem. It’s not certain, even then, whether the company’s deep R&D activities and commitment to new process technologies will be sufficient to deflect the dangers posed by its PC-centric business. – Analysis: Intel must reinvent itself (EDN, June 19, 2007)
Intel did dabble in foundry services, but it never went fully in. That was a mistake. At one point, TSMC was reported to be 5 or more years behind Intel in process technology. Rather than waiver, the company dug in. It has now overtaken Intel.
So, Intel is now one or two technology nodes behind TSMC and will give up because of this? That’s unbelievably myopic. The company messed up and heads need to roll. It has already said goodbye to Venkata Renduchintala, chief engineering officer and president of the Technology, Systems Architecture and Client Group, and broken up the unit.
Others, including CEO Swan, should be penalized, if only for the mush of vision he served up during a call with analysts last week. The Intel that Andy Grove led to higher growth when he exited the DRAM business in the mid-1980s knew how to deal with catastrophic “inflection points”. Can Swan offer a similar level of visionary leadership by pointing company in a future growth area or were the folks who argued he was not the right man for the job because of his lack of engineering creds correct?