Intel Weighs Options Including Foundry Split to Stem Losses

[brad.g.todd]

I worked at IBM EF when they were riding high on bipolar technology and had margin galore but when thermal loads became unmanageable and CMOS took over they had to compete and that was that. As this relates to IFS, people are correct that IBM, AMD tried to spin off the fabs and go fabless due to the high cost and competitive nature of fab operations. What is different with IFS?

I worked with IBM, AMD, Intel fabs for quite a few years and, for what its worth, only Intel had the discipline it took to create state-of-the-art, low cost chips. Intel used to know how to make competitve chips. Then internal politics allowed the product side of the business to de-priortize the fab operations and cause this business to go into decline for lack of capital expenditure (well documented).

Two questions present themselves in my mind; does IFS still know how to run volume manufacturing of advanced chips? and does the Intel board have the depth in manufacturing required to support this? The recent departure of Lip-Bu Tan suggests that the board may be the real problem preventing IFS from separating and being successful.

 

[brad.g.todd]

I don't think Intel will survive without manufacturing. It was my understanding that Intel products would be more competitive using Intel manufacturing? If that IS the case Intel needs manufacturing. If that is NOT the case Intel cannot afford manufacturing.

The foundry business is a marathon. Foundry customers are literally betting the future of their products and company on their foundry partner. Thus the TSMC "trusted foundry" mantra. Personally I do not think Intel will succeed financially (as compared to TSMC) in the foundry business. Intel must have design integrated in. Samsung knows this, Intel should know this as well.

I'm surprised no one has brought up the elephant in the room; the West needs to have a State-of-Art chip manufacturing capability. Intel is the only western hemisphere company to have accomplished this in the last twenty years. It remains unclear whether TSMC can function in the US and Intel always has. The government bailed out GM and were paid back in the end. The government may be beginning to understand that Intel fabs are the only game in town to invest in.

 

[Erik F]

It seems Pat is going all in on IFS, sell non-core units. No split yet

Exclusive-Intel CEO to pitch board on plans to shed assets, cut costs, source says

Intel CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company’s board of directors to slice off unnecessary businesses and revamp capital spending, according to a source familiar with the matter, as they try to revive the once-dominant chipmaker's...

finance.yahoo.com

Will the BOD accept the plan or find another CEO?

 

[brad.g.todd]

Reminder: Intel fabs ARE the problem. That is why Intel planned to outsource in 2020.
Selling the fabs is not the correct term. Offload the fabs is correct term. IBM showed they way for Intel

As we mentioned a year ago. PAY someone to take the fabs, get guaranteed capacity, Let the product group choose the correct Fab and OSAT partner.

First step: Admit the fab buildout was a mistake, Agree foundry revenue will only be 2B per year in 2027 best case. Cancel all fabs except Fab 52, give the other sites to TSMC. Small ramp of 18A in Oregon until 2026/7. Let product group use TSMC indefinitely so they dont have to keep doing parallel design support.

FYI: Pats speech yesterday did not seem to indicate any plans to change. It seemed to be "2030 is just around the corner"

The choice is obvious and will lead to stockholder value doubling. But who at Intel will make the decision?

It would seem that IPG is the problem and missed the writing on the GPU wall. The fab operations were not invested in over past twelve years so naturely declined.

 

[brad.g.todd]

Client compute CCG is still the dominate player in the x86 space. They should be IFS equivalent Apple at TSMC.

Agree CCG stable to declining business, almost like Apple phone, LOL. But is huge volumes on leading edge silicon. It is the foundation that can and should help IFS stand up.

It will be telling what Lunar Lake looks like. If it isn’t double digit ahead on some workloads and beating AMD, Apple and Qualcomm on the majority of the others than it will affirm that intel product team is a lagging org and Intel is indeed finished

Not sure the US can afford for Intel manufacturing to be 'finished'. I would say that the product group in not in the same situation.

 

[hist78]

I'm surprised no one has brought up the elephant in the room; the West needs to have a State-of-Art chip manufacturing capability. Intel is the only western hemisphere company to have accomplished this in the last twenty years. It remains unclear whether TSMC can function in the US and Intel always has. The government bailed out GM and were paid back in the end. The government may be beginning to understand that Intel fabs are the only game in town to invest in.

TSMC Arizona fab will go into mass production next year. Along with TSMC's customers, such as Apple, Qualcomm, AMD, Nvidia, Broadcom, Tesla, Ampere Computing, Cerebras, Microsoft, Google, Amazon, and Facebook, the US semiconductor industry is getting better and stronger.

The US government has been preparing for a market without a strong Intel for a while. Intel probably needs find a way to save itself without looking for additional money from the government.

 

[DepthFirst]

It seems Pat is going all in on IFS, sell non-core units. No split yet

Exclusive-Intel CEO to pitch board on plans to shed assets, cut costs, source says

Intel CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company’s board of directors to slice off unnecessary businesses and revamp capital spending, according to a source familiar with the matter, as they try to revive the once-dominant chipmaker's...

finance.yahoo.com

Will the BOD accept the plan or find another CEO?

What is there to sell? Mobileye?

 

[Erik F]

What is there to sell? Mobileye?

and altera

 

[BruceA]

TSMC Arizona fab will go into mass production next year. Along with TSMC's customers, such as Apple, Qualcomm, AMD, Nvidia, Broadcom, Tesla, Ampere Computing, Cerebras, Microsoft, Google, Amazon, and Facebook, the US semiconductor industry is getting better and stronger.

The US government has been preparing for a market without a strong Intel for a while. Intel probably needs find a way to save itself without a looking for additional money from the government.

LOL, sucker for the politics! At best the first phase is just starting next year on N4 and years later than planned. At best a few thousand wafers a month and by the time they get to their stated 20K A16 will be ramping in Taiwan and at best N-2 node at such a small scale it means nothing. Phase 2 and 3 are political built shells and given the schedule and cost slips who knows when they come online. TSMc needs to figure out how to staff as nobody from Taiwan wants to come and attrition at the US fab means they are losing people faster than they can hire. Of course they can get all the Intel layoff people, that should be a great recipe for a great workforce shouldn’t it!

BTW at best low volume and high cost in Fab21 and no way more than a couple of those listed will have products running. In 2026 when the fab finally gets columewho need high cost low volume N4?

 

[brad.g.todd]

TSMC Arizona fab will go into mass production next year. Along with TSMC's customers, such as Apple, Qualcomm, AMD, Nvidia, Broadcom, Tesla, Ampere Computing, Cerebras, Microsoft, Google, Amazon, and Facebook, the US semiconductor industry is getting better and stronger.

The US government has been preparing for a market without a strong Intel for a while. Intel probably needs find a way to save itself without a looking for additional money from the government.

Ha

LOL, sucker for the politics! At best the first phase is just starting next year on N4 and years later than planned. At best a few thousand wafers a month and by the time they get to their stated 20K A16 will be ramping in Taiwan and at best N-2 node at such a small scale it means nothing. Phase 2 and 3 are political built shells and given the schedule and cost slips who knows when they come online. TSMc needs to figure out how to staff as nobody from Taiwan wants to come and attrition at the US fab means they are losing people faster than they can hire. Of course they can get all the Intel layoff people, that should be a great recipe for a great workforce shouldn’t it!

BTW at best low volume and high cost in Fab21 and no way more than a couple of those listed will have products running. In 2026 when the fab finally gets columewho need high cost low volume N4?

I recall life in the TSMC fabs in Taiwan as not being that great for the workers. Not sure TSMC can figure out how to deal with US employees successfully. Just a risk factor.

 

[BruceA]

I worked at IBM EF when they were riding high on bipolar technology and had margin galore but when thermal loads became unmanageable and CMOS took over they had to compete and that was that. As this relates to IFS, people are correct that IBM, AMD tried to spin off the fabs and go fabless due to the high cost and competitive nature of fab operations. What is different with IFS?

I worked with IBM, AMD, Intel fabs for quite a few years and, for what its worth, only Intel had the discipline it took to create state-of-the-art, low cost chips. Intel used to know how to make competitve chips. Then internal politics allowed the product side of the business to de-priortize the fab operations and cause this business to go into decline for lack of capital expenditure (well documented).

Two questions present themselves in my mind; does IFS still know how to run volume manufacturing of advanced chips? and does the Intel board have the depth in manufacturing required to support this? The recent departure of Lip-Bu Tan suggests that the board may be the real problem preventing IFS from separating and being successful.

Intel’s failure on the fab / TD side was due to a rash of non visionary senior leaders in LTD, didn’t help the whole x86 profit poisoned all of leadership.

The Board has nobody of substance with insight or credibility to challenge Pat and the leaders who update them.

The senior leadership at TSMC deadly technical top to bottom something completely lacking at Intel. The problem starts there! The fab Directors are so technical savvy compared to the Intel side. I could go on and on, a lot needs to change at Intel

 

[jim_22222]

Intel’s failure on the fab / TD side was due to a rash of non visionary senior leaders in LTD, didn’t help the whole x86 profit poisoned all of leadership.

The Board has nobody of substance with insight or credibility to challenge Pat and the leaders who update them.

The senior leadership at TSMC deadly technical top to bottom something completely lacking at Intel. The problem starts there! The fab Directors are so technical savvy compared to the Intel side. I could go on and on, a lot needs to change at Intel

culture shift is necessary

One major difference between US and Taiwanese work cultures that often stands out is the approach to driving for excellence versus being satisfied with the status quo. In TW, there is a strong cultural emphasis on innovation, continuous improvement, and the entrepreneurial spirit. This is reflected in the workplace where there is often a push to go above and beyond, to challenge existing norms, and to strive for excellence. The TW work culture tends to reward risk-taking and celebrates those who disrupt industries with new and better ways of doing things.

In contrast, US (TI) work culture has traditionally placed a high value on harmony, stability, and respect for established practices. While there is certainly a drive for excellence within US companies, there is also a greater acceptance of the status quo, especially when it maintains social cohesion and respects the collective workflow. This can lead to a more cautious approach to innovation and change, where incremental improvements are favored over radical shifts. The US work environment often emphasizes group consensus and may prioritize maintaining a stable and predictable business environment over aggressive expansion or re-invention.

 

[semiman]

Now, absolutely Pat and leadership were overly optimistic and out of touch on customer desire for their products, likely significantly because of the seismic shift caused by GenAI. But, again: 2024/25 was never going to be roses for Intel, neither Product nor Foundry.

We, including Intel, knew that this year and the next year will be the worst. But judging from the fact that Intel wants to delay its new fabs all over the world now, most likely they dropped the ball at some point, serious enough to consider spinning out. I think this is more than just 'overly optimistic', but executive failure.

 

[XYang2023]

We, including Intel, knew that this year and the next year will be the worst. But judging from the fact that Intel wants to delay its new fabs all over the world now, most likely they dropped the ball at some point, serious enough to consider spinning out. I think this is more than just 'overly optimistic', but executive failure.

I think the issue is that PG is overly ambitious and did not expect the impact from Gen AI on DCAI.

I think scaling back is the right thing to do. It should focus on finishing the plants in the US to harvest Chips Act rewards and have enough shell capacities to follow through its foundry roadmap.

It should also focus on share price performance going forward (products and margins). Separating the foundry should be done at a later stage (2030).

 

[hist78]

culture shift is necessary

One major difference between US and Taiwanese work cultures that often stands out is the approach to driving for excellence versus being satisfied with the status quo. In TW, there is a strong cultural emphasis on innovation, continuous improvement, and the entrepreneurial spirit. This is reflected in the workplace where there is often a push to go above and beyond, to challenge existing norms, and to strive for excellence. The TW work culture tends to reward risk-taking and celebrates those who disrupt industries with new and better ways of doing things.

In contrast, US (TI) work culture has traditionally placed a high value on harmony, stability, and respect for established practices. While there is certainly a drive for excellence within US companies, there is also a greater acceptance of the status quo, especially when it maintains social cohesion and respects the collective workflow. This can lead to a more cautious approach to innovation and change, where incremental improvements are favored over radical shifts. The US work environment often emphasizes group consensus and may prioritize maintaining a stable and predictable business environment over aggressive expansion or re-invention.

Although it may not be a as strong as it's used to be at Intel, those "innovation, continuous improvement, and the entrepreneurial spirit" are still very prevalent among those startups in the US.

 

[hist78]

It seems Pat is going all in on IFS, sell non-core units. No split yet

Exclusive-Intel CEO to pitch board on plans to shed assets, cut costs, source says

Intel CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company’s board of directors to slice off unnecessary businesses and revamp capital spending, according to a source familiar with the matter, as they try to revive the once-dominant chipmaker's...

finance.yahoo.com

Will the BOD accept the plan or find another CEO?

I believe in order to survive, Intel needs to change its business model and shrink, split, and shrink. I sensed there are some serious debate or infighting about whether to split Intel's design and manufacturing into two independent companies. If Pat Gelsinger insists to stay in the IDM model while Intel Board of Directors wants go the other way, it may provide an opportunity for Pat Gelsinger to gracefully exit from Intel.

 

[hist78]

We, including Intel, knew that this year and the next year will be the worst. But judging from the fact that Intel wants to delay its new fabs all over the world now, most likely they dropped the ball at some point, serious enough to consider spinning out. I think this is more than just 'overly optimistic', but executive failure.

"I think this is more than just 'overly optimistic', but executive failure."


People often blame the failures and poor execution of past or current Intel CEOs for all the troubles Intel is facing today. But haven't we recognized by now that multiple Intel CEO failures are the logical outcome of Intel's business model?

Intel's IDM business model cannot meet the real-world challenges of today and tomorrow. It's Intel's wrong business model that led to wrong strategies, poor decisions, flawed financial practices, misguided product directions, the appointment of an ineffective board of directors, and the hiring of unsuitable CEOs.

 

[tooLongInEDA]

culture shift is necessary

One major difference between US and Taiwanese work cultures that often stands out is the approach to driving for excellence versus being satisfied with the status quo. In TW, there is a strong cultural emphasis on innovation, continuous improvement, and the entrepreneurial spirit. This is reflected in the workplace where there is often a push to go above and beyond, to challenge existing norms, and to strive for excellence. The TW work culture tends to reward risk-taking and celebrates those who disrupt industries with new and better ways of doing things.

In contrast, US (TI) work culture has traditionally placed a high value on harmony, stability, and respect for established practices. While there is certainly a drive for excellence within US companies, there is also a greater acceptance of the status quo, especially when it maintains social cohesion and respects the collective workflow. This can lead to a more cautious approach to innovation and change, where incremental improvements are favored over radical shifts. The US work environment often emphasizes group consensus and may prioritize maintaining a stable and predictable business environment over aggressive expansion or re-invention.

I can't believe you've repeated this complete nonsense about US work culture. I let it go last time (this being a professional semiconductor discussion site and not wishing to get sucked into your tirades of personal abuse).

I seriously wonder exactly where you're getting all this from. My experience over more than three decades around the semiconductor industry is the exact opposite. It is the US companies - certainly the start-ups - who are the most innovative and place the least emphasis on traditional values and social coshesion and stability. And have the least attachments to respecting people purely for their seniority. Of course, you will always find exceptions - and large companies everywhere tend to sclerosis unless well managed.

How on earth do you think Silicon Valley happened, thrived and continues to grow if US work values are so pathetic and anti-innovative ?

Why would you assume that TI work culture is the same as US work culture in general ? Silicon Valley work culture is vastly different from that in Texas (or certainly was when I was at TI). Yes, TI had some specific things at that time that we might consider failings - rarely hired externally after graduate level, top management all seemed to have gone through SMU, etc. . I imagine some of those have changed since then. However, complacency and mediocrity were not amongst them. They put a lot of emphasis on quality, customers and continuous improvement.

I came across an interesting phrase yesterday watching a video about Korea: "creative imitation". It strikes me that this is what Asia (Japan, Korea, Taiwan, China) is really good at - getting into existing industries after the initial innovation and growth phase and then mastering the incremental innovations in the following phases. It's also what the UK is spectacularly bad at, but that's another discussion. But we risk confusing that sort of innovation with the initial "breakout innovation" where completely new products and concepts are developed.

As for your repeated assertion that the US is somehow prejudiced against promoting foreigners: I can only assume you've never worked in countries like France or Korea ! Nowhere is a perfect meritocracy. But the US is at the top end of the league table. Note: I'm saying this as a Brit, so no dog in this fight.

Corrected 03-Sep24 : "creative innovation" corrected to "creative imitation" which was the term used in the video to describe Korean industrial innovation.

 

[XYang2023]

I think the problem with Intel is finance. Personally, I am very disappointed at how Intel is treated in the US. For example, they banned Intel from selling client chips to Huawei. The lost revenues could be used to build fabs. What Intel is doing is underwriting an insurance policy for the west in case there is a conflict in the Taiwan straight. The cost of such policy should not be paid by the shareholders. At the same time, all other parties really want Intel to demise. It is like watching a group of hyenas attacking a pregnant zebra piece by piece. Maybe that is the problem with PG. Intel would be better with a person familiar with technology and at the same time focusing on top and bottom lines.

In China, the government is very supportive to Huawei's effort to catchup with the west.

 

[siliconbruh999]

manufacturing is very difficult without state aid be it the iPhone assembly in India/TSMC in Taiwan/ SK Hynix/Samsung in Korea west Slept on this and outsourced manufacturing while asian rivals grew their strength with state aids