Intel Weighs Options Including Foundry Split to Stem Losses

[hist78]

"The company is discussing various scenarios, including a split of its product-design and manufacturing businesses, as well as which factory projects might potentially be scrapped, said the people, who asked not to be identified because the deliberations are private.

Morgan Stanley and Goldman Sachs Group Inc., Intel’s longtime bankers, have been providing advice on the possibilities, which could also include potential M&A, the people said. The discussions have only grown more urgent since the Santa Clara, California-based company delivered a grim earnings report this month, which sent the shares plunging to their lowest level since 2013.

The various options are expected to be presented during a board meeting in September, the people said."

Intel Considers Options Such as a Foundry Split; Shares Soar

(Bloomberg) -- Intel Corp. is working with investment bankers to help navigate the most difficult period in its 56-year history, according to people familiar with the matter.Most Read from BloombergHow Air Conditioning Took Over the American OfficeHong Kong’s Arts Hub Turns to Selling Land to...

finance.yahoo.com

 

[count]

Foundry split needs to happen if Intel is to turn around

 

[XYang2023]

Could the following strategy work?

1. Split out the foundry business, e.g. merge with GF with the backing from Saudi
2. Use the proceeds to payoff debts
3. Cancel the splits of Mobileye and Altera and form a group to focus on automotive and edge AI
4. Expedite GPU/accelerator development
5. Provide software solutions, for example, something similar to Nvidia's AI foundary, digital twins, etc
6. Develop competitive client and data centre CPUs
7. Improve the efficiency of the organisation

 

[DepthFirst]

Very concerning that it’s coming to this. Intel fabs on their own will not survive without continuous capex which could only come from the profits of their design.

 

[delong.height]

Could the following strategy work?

1. Split out the foundry business, e.g. merge with GF with the backing from Saudi
2. Use the proceeds to payoff debts
3. Cancel the splits of Mobileye and Altera and form a group to focus on automotive and edge AI
4. Expedite GPU/accelerator development
5. Provide software solutions, for example, something similar to Nvidia's AI foundary, digital twins, etc
6. Develop competitive client and data centre CPUs
7. Improve the efficiency of the organisation

1. undo everything Pat has done. He said "If you are looking to split, you should hire a PE guy". And Saudi isn't making money from GF, the entire market is eaten up by TSMC
2. payoff debt OR invest in fabs?
3. is not easy. they're already public companies. and asking them to come back is harder and time-consuming
4. intel has always been doing this since Pat' comeback
5. yes, one of the thing I saw the CTO was bragging about; but that's so much slower. yes, 100m to 1b by 2027, that just seem so little. it's too small.
6. i feel like they waited forever to try to deliver these product
7. they've been trying to do this, no reaction from the market.

 

[MKWVentures]

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?

 

[XYang2023]

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 be beneficial for both TSMC and Intel. TSMC would become more diversified geographically. I think there should be compensation as Intel has spent considerable amount of money and time to build those shells. Intel can use the proceeds to payoff debts.

 

[chillfire]

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?

Do you think TSMC Arizona project is successful? If TSMC has already had such a trouble in their own project, how can we believe TSMC will run Intel Fabs successfully?

 

[lefty]

Foundry split needs to happen if Intel is to turn around

Well look what happened when when AMD tried to split their foundries. They had to find a buyer and the buyer insisted on putting a clause in the contract that AMD would have to continue using the foundry for many years - otherwise the new company would have instantly gone bankrupt. In the end the buyer of Globalfoundies lost tonnes of money and they crashed out of leading edge development. The same thing could happen if Intel split their foundries. Intel foundries are a money hole. Who's going to buy that?

 

[XYang2023]

@mingchikuo

I'm told that one of the main reasons for Lip-Bu Tan's departure from Intel's board of directors is to join the spin-off committee. This move is to ensure that he can help Intel plan the potential spin-off of chip design and foundry operations from a neutral and objective standpoint. There have long been rumors that Intel may spin off its chip design and foundry businesses. While no decision has been made, this is the closest moment Intel has come to a spin-off.

x.com

x.com

 

[Daniel Nenni]

@mingchikuo

I'm told that one of the main reasons for Lip-Bu Tan's departure from Intel's board of directors is to join the spin-off committee. This move is to ensure that he can help Intel plan the potential spin-off of chip design and foundry operations from a neutral and objective standpoint. There have long been rumors that Intel may spin off its chip design and foundry businesses. While no decision has been made, this is the closest moment Intel has come to a spin-off.

x.com

x.com

Yesterday Lip-Bu stated that he has family issues that are forcing him to cut back on work. Family issues means his wife made him do it. He also said he has been 4x busy since he left Cadence. There was also a mention him working on nuclear energy projects which is what his masters from MIT is in.

But I agree, if Intel is splitting the company it needs a new BoD.

 

[Daniel Nenni]

Foundry split needs to happen if Intel is to turn around

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.

 

[BruceA]

Whether to split or not is a huge strategic premise / decisions.

To review and reflect on this.

Leading edge process development requires a decade ahead exploratory work, pathfinding and the final feature definition, then development. During this you need to nurture/cowork EDA, Tool and fabless ( internal products). Given the timeline and cost you need huge scale to get necessary ramp learning. Also must have huge outlay for a decade.

There is no shortcut to delivering mature and reliable robust leading edge process, you need a high volume product that can leverages leading edge and has volume to partially or fully fund the technology cadence. Clearly Intel x86 can no longer due it exclusively, just like IBM, DEC, Motorola and AMD/GF failed. Only if 10nm and Intel4/3 came on time and all the Intel products had stayed in house for the computed, graphics and base die it could have been different. Since they all went out you have a half decade of darkness before they come back in to keep IFS head above water.

It can and should work. Intel is unique in having volume hundreds of millions of units like that they can be that customer. One could argue Nvidia is almost like IBM or DEC like 30+ years ago to do this, or the systems company like MSFT, Apple, Amazon, Google could entertain, but they all have a go to supplier that continues to have leadership and scale and at least on the surface delivers that there is no reason to consider doing anything till IFS delivers parity to superior process.

This is a catch22, to unleash and separate CCG and DCAI would free them to pick TSMC. CCG with its volume can and did pay to secure capacity and we will see with Lunar Lake that. Clearly to make IFS work it needs a volume client and the only one that could/can be forced to choose it would be CCG.

To separate them, it’s a no brainer the right thing for CCG is to secure volume A16 after doing products on N3B and N3P. If they went that route where would that leave IFS? This time there is no sugar daddy and doubt the Us government nor Oil state would bankroll the billions in development and tens of billions in fab capex to make IFS successfully.

The only question is how to fund this joint IDM2.0 or really if you split and continue it’s nothing but a disingenuous play as the fabless side still isn’t free and just a shell game, someone still has to pay for the IFS side.

It was always going to be a ten year plan and the onset now with the slowing CCG and DCAI the full situation is just exposed more bare.

 

[blueone]

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

I'm not convinced this is the case. Intel's merchant CPU business is arguably in decline, in clients and servers. Client CPUs look seriously under threat from Apple, AMD, and Qualcomm, and server CPUs from AMD, Ampere, and the cloud companies' internal designs. Unclear if Gaudi will succeed in AI, since there's so much investment going on from Nvidia, AMD, and a lot of small semi companies. I haven't found any data on Intel's Xe data center revenue, but I suspect it's a small fraction of DCAI revenue.

One tidbit that raised an eyebrow on me was that when Nvidia announced their quarterly results, they listed networking products revenue as a separate line item for the first time. Networking products are running at greater than a $3B/quarter rate, meaning that Nvidia's InfiniBand, Ethernet, and NVLink products will probably have an annual revenue of >$12B. So Intel's entire DCAI revenue in the most current quarter is less than Nvidia's networking revenue. Intel's own Network and Edge Group is about 1/3 the size of Nvidia's networking revenue.

I think you're over-estimating the current value of Intel's design groups.

 

[hist78]

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.

At this junction, a fabless and foundry split at Intel may have the greatest potential save one of them or both of them. Also, if they stay together as the current format will have the greatest potential to kill both of them.

 

[BruceA]

I'm not convinced this is the case. Intel's merchant CPU business is arguably in decline, in clients and servers. Client CPUs look seriously under threat from Apple, AMD, and Qualcomm, and server CPUs from AMD, Ampere, and the cloud companies' internal designs. Unclear if Gaudi will succeed in AI, since there's so much investment going on from Nvidia, AMD, and a lot of small semi companies. I haven't found any data on Intel's Xe data center revenue, but I suspect it's a small fraction of DCAI revenue.

One tidbit that raised an eyebrow on me was that when Nvidia announced their quarterly results, they listed networking products revenue as a separate line item for the first time. Networking products are running at greater than a $3B/quarter rate, meaning that Nvidia's InfiniBand, Ethernet, and NVLink products will probably have an annual revenue of >$12B. So Intel's entire DCAI revenue in the most current quarter is less than Nvidia's networking revenue. Intel's own Network and Edge Group is about 1/3 the size of Nvidia's networking revenue.

I think you're over-estimating the current value of Intel's design groups.

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

 

[osnium]

"The company is discussing various scenarios, including a split of its product-design and manufacturing businesses, as well as which factory projects might potentially be scrapped, said the people, who asked not to be identified because the deliberations are private.

Morgan Stanley and Goldman Sachs Group Inc., Intel’s longtime bankers, have been providing advice on the possibilities, which could also include potential M&A, the people said. The discussions have only grown more urgent since the Santa Clara, California-based company delivered a grim earnings report this month, which sent the shares plunging to their lowest level since 2013.

The various options are expected to be presented during a board meeting in September, the people said."

Intel Considers Options Such as a Foundry Split; Shares Soar

(Bloomberg) -- Intel Corp. is working with investment bankers to help navigate the most difficult period in its 56-year history, according to people familiar with the matter.Most Read from BloombergHow Air Conditioning Took Over the American OfficeHong Kong’s Arts Hub Turns to Selling Land to...

finance.yahoo.com

For what it’s worth, it will be an epic board meeting.

 

[hist78]

For what it’s worth, it will be an epic board meeting.

But I'm wondering if Intel's Board of Directors has the breadth and depth to guide Intel through this turbulent time. Again, let me say it: Intel's Board is full of nice people, but not the right people.

 

[BruceA]

But I'm wondering if Intel's Board of Directors has the breadth and depth to guide Intel through this turbulent time. Again, let me say it: Intel's Board is full of nice people, but not the right people.

You are wondering? If the Board had any capability or competence they would should have went into IDM2.0 and demanded the necessary cuts to be competitive. Layoffs should have continued aggressively over the last three year. That natural glide would have forced structural transformations to happen which likely have not

 

[hist78]

Whether to split or not is a huge strategic premise / decisions.

To review and reflect on this.

Leading edge process development requires a decade ahead exploratory work, pathfinding and the final feature definition, then development. During this you need to nurture/cowork EDA, Tool and fabless ( internal products). Given the timeline and cost you need huge scale to get necessary ramp learning. Also must have huge outlay for a decade.

There is no shortcut to delivering mature and reliable robust leading edge process, you need a high volume product that can leverages leading edge and has volume to partially or fully fund the technology cadence. Clearly Intel x86 can no longer due it exclusively, just like IBM, DEC, Motorola and AMD/GF failed. Only if 10nm and Intel4/3 came on time and all the Intel products had stayed in house for the computed, graphics and base die it could have been different. Since they all went out you have a half decade of darkness before they come back in to keep IFS head above water.

It can and should work. Intel is unique in having volume hundreds of millions of units like that they can be that customer. One could argue Nvidia is almost like IBM or DEC like 30+ years ago to do this, or the systems company like MSFT, Apple, Amazon, Google could entertain, but they all have a go to supplier that continues to have leadership and scale and at least on the surface delivers that there is no reason to consider doing anything till IFS delivers parity to superior process.

This is a catch22, to unleash and separate CCG and DCAI would free them to pick TSMC. CCG with its volume can and did pay to secure capacity and we will see with Lunar Lake that. Clearly to make IFS work it needs a volume client and the only one that could/can be forced to choose it would be CCG.

To separate them, it’s a no brainer the right thing for CCG is to secure volume A16 after doing products on N3B and N3P. If they went that route where would that leave IFS? This time there is no sugar daddy and doubt the Us government nor Oil state would bankroll the billions in development and tens of billions in fab capex to make IFS successfully.

The only question is how to fund this joint IDM2.0 or really if you split and continue it’s nothing but a disingenuous play as the fabless side still isn’t free and just a shell game, someone still has to pay for the IFS side.

It was always going to be a ten year plan and the onset now with the slowing CCG and DCAI the full situation is just exposed more bare.

Don't you think many of Intel's troubles and dilemmas today are self-inflicted? Many of them result from purely stupid decisions caused by ignorance and arrogance. This will scare away outsiders who might come to the rescue.