Intel’s Future Is Prettier Than Its Past Quarter And Guide

[Daniel Nenni]

Interesting perspective, I respect Patrick:

If you follow the semiconductor market, you likely read about Intel’s Q4 earnings and Q1 guide. It wasn’t pretty, a confluence of many different things hitting at once. One thing that didn’t get talked about a lot was Intel’s long-term future. I get it- Wall Street lives off quarterly reports, and most press articles have an even shorter time horizon. And for many who don’t understand the semiconductor market, it’s hard to talk about a future with a challenging current narrative. Having been in and around semiconductors for over 30 years, I can definitively say that a real semiconductor turnaround takes 4-5 years, and I’ve never seen one happen quicker. While it’s easy to start with Intel’s quarter and guide and ignore the future, I’m going to start with a view of the future and then talk about the quarter and guide.

Let’s dive in.

Intel’s Future Is Prettier Than Its Past Quarter And Guide

#1 ranked technology industry analyst Patrick Moorhead dives into Intel's Q4 earnings report and talks about the future.

www.forbes.com

The AMD call should be very interesting. I think competition in the datacenter market is intensifying for Intel including home grown chips.

 

[intrested]

• MediaTek will buy $4B of production using Intel 3 over the node’s lifetime

did anyone else made this claims? or is it based on

my call with Pat Gelsinger before the call

 

[hist78]

did anyone else made this claims? or is it based on

I believe Mr. Moorhead misunderstood what Pat Gelsinger meant. IFS customers, including Mediatek, and a new Intel 3 IFS customer (in the cloud/edge/datacenter business) will give IFS a total $4 billion potential revenue. Mediatek didn't commit $4 billion order alone on the Intel 3 process.

Pat Gelsinger was saying:

"Progress in TD continues to be validated by our IFS pipeline. I am very happy that we were able to add a leading cloud, edge and datacenter solutions provider as a leading-edge customer for Intel 3. Including prior customers such as MediaTek, we now have lifetime deal value of greater than $4 billion for IFS."


Source: https://d1io3yog0oux5.cloudfront.ne...arks/Q4+22+Investor+Call+Prepared+Remarks.pdf

 

[nghanayem]

did anyone else made this claims? or is it based on

In the call intel said they signed more than 4B in IFS contracts. Mediatek is one on i16. In the call they also said that they snagged a cloud provider for i3. They also said they had a big customer committed on 18A and multiple other customers tapeing out or at least considering IFS. They ended that bit of the call with the statement that more details on the i3/18A deals would come later this year.

 

[hist78]

Interesting perspective, I respect Patrick:

If you follow the semiconductor market, you likely read about Intel’s Q4 earnings and Q1 guide. It wasn’t pretty, a confluence of many different things hitting at once. One thing that didn’t get talked about a lot was Intel’s long-term future. I get it- Wall Street lives off quarterly reports, and most press articles have an even shorter time horizon. And for many who don’t understand the semiconductor market, it’s hard to talk about a future with a challenging current narrative. Having been in and around semiconductors for over 30 years, I can definitively say that a real semiconductor turnaround takes 4-5 years, and I’ve never seen one happen quicker. While it’s easy to start with Intel’s quarter and guide and ignore the future, I’m going to start with a view of the future and then talk about the quarter and guide.

Let’s dive in.

Intel’s Future Is Prettier Than Its Past Quarter And Guide

#1 ranked technology industry analyst Patrick Moorhead dives into Intel's Q4 earnings report and talks about the future.

www.forbes.com

The AMD call should be very interesting. I think competition in the datacenter market is intensifying for Intel including home grown chips.

One major difference between AMD's and Intel's turnaround is AMD went through a asset light path. AMD didn't spend billions on building fabs or creating a foundry business. On the other hand, majority of Intel's billions spending are on building several fabs, acquiring expensive equipments, and establishing foundry ecosystem.

AMD's turnaround is a much focused one mainly on product design and development.

Is Intel betting too much on too many fronts?

 

[intrested]

yeah, that seems like the source of his misunderstanding.

i think his observation about the server market contraction is also not correct

Intel alluded to “TAM contraction.” In a call Monday with DCAI leadership, China kept coming up as “soft.” This “TAM contraction” was new for me as Dell Tech, HPE, and Lenovo continued to rack up respectable server growth numbers, and the hyperscalers didn’t appear to be shrinking back.

so he does not see any softness except for Intel, however, Lisa Su said today in AMD earnings call:

We do see elevated levels of inventory with some cloud customers, which will lead to a softer first half and a stronger second half of the year

so AMD is using the exact same Soft language that intel.

 

[intrested]

One major difference between AMD's and Intel's turnaround is AMD went through a asset light path. AMD didn't spend billions on building fabs or creating a foundry business. On the other hand, majority of Intel's billions spending are on building several fabs, acquiring expensive equipments, and establishing foundry ecosystem.

AMD's turnaround is a much focused one mainly on product design and development.

Is Intel betting too much on too many fronts?

in essence this argument is saying: intel's challenge might be tougher than AMDs challenge before the turn around, so AMD is not evidence.

or you try to say that Intel has to spend way to much money and they have to execute in several different segments.

valid points, but Patrick, and basically anyone else who is arguing for a possible Intel turnaround would just state that turnarounds takes a lot of time, so we can not make any judgment based on current situation as they need more time, so we can only measure the turn around by the progress Intel is making in IFS execution towards intel 4/3 and intel 20a/18a, and while those increase the opex and Capex figures and decrease the margin figures, they dont produce anything in revenue, so financial numbers is not a measure stick for intel 3 or 18a, but we might measure progress by checking if ISF got some costumers, and perhaps we can measure ISF execution by listening to intel's timeline updates.

And if we measure intel according to updated timelines and according to external costumers signing up to ISF, we got good news in both of those measures, Intel reiterated high confident that it will deliver on its ambitious timeline giving some updates about 18A node already running in the lab, giving a tone of high confidence, etc, its easy to defend missed expectation if those expectations were made 2 years ago, but every quarter we are getting closer to those promised launches, and if intel would not be executing well we would expect them to give us some hints of delays, yet intel was indicating confidence, so thats one measure of execution, again, its not like revenue measures, financial numbers are a great measure because numbers dont lie, but for intel 3 and intel 18a there is only expectations in the equation, revenue is not a possible measure here.

And to reinforce the notion that ISF is executing and progressing well, we got good news in the measure of external costumers who are signing up to ISF, we see tape outs for intel 3 and 18a, PDKs done, etc, with a promise to disclose major wins throughout the year, and that should outweigh the revenue figures for the very last 6 months.


of course its still possible that intel is overconfident in its abilities, of course the challenge is tough, of course intel is in a bad situation, however, intel's biggest problem is not the earnings for last quarter, and the way to measure the possibilities of intel's future turn around is not by measuring how tough it would be to turn around, instead we would like to measure if the proposed solutions are being executed and progress well, and while we dont have yet any hard proof that intel is making progress, we have at least some considerable indicators pointing to a better future for intel.

 

[hist78]

Let's triple the $4 billion potential IFS revenue revealed by Pat Gelsinger to $12 billion and assume it will span out to three years to fullfil those orders. That's $4 billion IFS revenue per year starting 2025.

But Intel 2022 revenue dropped to $63.1 billion from $79 billion in 2022 along with fast shrinking profit. Intel's forecast for 2023 is not great either. IFS $4 billion yearly revenue starting 2025 (or let's make it 2024) is too small and too late to solve the crashing revenue and crashing profit margin Intel is facing.

 

[intrested]

Last quarter was particularly weak for intel and for their competitors as well, I believe the current macro environment is irrelevant.

but looking at the past 18 months we know that Cloud providers have been buying CPU servers, gamers have been buying GPUs, and apple sold macs, just not with Intel inside.. so the question is perhaps about intel losing to its competitors, will they ever make a comeback?

AMD, Nvidia, ARM, became the beneficiaries of intel's poor execution and roadmap, intel must not have MediaTek as a foundry costumer in order to grow revenue again with high margins, Intel just need capitalize on the ever growing server business, it needs to sell GPUs in the same way they sell CPU, It must have the greatest products in order to sell with high margins. those things are obvious.

ISF is not about revenue from Qualcomm or automotive, its about lunar lake, Granite Rapids, Sierra Forest, Ponto DaVinci, etc, those products depend on a leading process node, currently AMD sells chiplets with 5nm wafers, while intel is still dependent on a 10nm node that is 4 years old, but if intel is going to have the same advanced nodes as AMD is using, than we can see intel wining again.

We know that Granite Rapids / sierra forest will better compete with AMD / ARM, but we dont know if ISF will provide intel with the needed proces nodes, so any indication that ISF is progressing well against the challenging task of regaining foundry leadership is also boosting confidence in the entire Intel story.

Moreover, we know that intel ARC GPU is based on TSMC, and it will presumably continue to rely on TSM for a while, however there is a big doubting cloud hanging over Intels future, intel lost its credit after several years of delays and boring product releases against competitors who came up with much better solutions, it seemed like intel lacked direction, competency, etc, but if we see intel executing on its very ambitious ISF segment, we are getting more confidence on intels abilities as a company, regardless of the specific product.

the discussion if intel should outsource to TSM or stick with IDM is not related here, Intel already made the decision and we would perhaps measure intel's future according to path Pat has chosen.