Here is the Fortune article with my comments:
The vultures are circling—and America could potentially lose one of its most important manufacturing assets. After a horrendous earnings report last quarter, Qualcomm, ARM, Apollo, and probably others have been looking at how to pick the flesh off Intel’s bones.
A bit over dramatic don't you think? This is a ridiculous start to a rational discussion.
After 30 years of holding the crown as the world’s most valuable semiconductor company, Intel is selling below book value. At today’s price, Intel is an affordable acquisition for many, even much smaller tech companies. But what happens to Intel’s factories, designers, and intellectual property is vitally important.
Affordable acquisition for many? I do not agree and it would be disastrous in that the manufacturing side would not survive if left to compete head-to-head with TSMC.
Intel is the only large-scale American manufacturer of advanced logic semiconductors, even if it is no longer leading at the cutting edge. During the pandemic, we learned that shortages of semiconductors can have a devastating impact on the economy. Moreover, we need to develop leading-edge capacity to stay ahead in many advanced computing and defense-related technologies, including artificial intelligence. Most potential buyers of Intel would likely focus on cost-cutting and see little value in a money-losing manufacturing subsidiary (known in the industry as a foundry). In other words, profit-seeking buyers cannot be depended upon to maintain America’s manufacturing capability.
Again, Intel will never stay ahead of TSMC. TSMC's customer centric business model and ecosystem is unmatched. Whoever says different is sealing Intel's fate.
The entire world benefits if Intel has world-class capacity. TSMC and Intel have been competing for chip leadership for 30 years. Until seven or eight years ago, Intel was winning this battle.
Intel was winning the process leadership battle yet TSMC still thrived. How many times has Intel tried to compete in the foundry business during that time and failed?
While this never-ending competition has made the world richer and must continue, depending on a single manufacturer strategically located with its most advanced factories in Taiwan is a global risk. In semiconductors, process research and development and leading-edge manufacturing must be co-located. So TSMC will never move its most advanced technology to the U.S. It is simply too expensive, requires too much infrastructure and too many key employees would have to move. The U.S. needs Intel.
The world needs to keep Taiwan safe. There is no way Intel or Samsung can replace TSMC. TSMC is 30+ years in the making and gets stronger every year. No one, not even the US Government, has the time or resources to replace TSMC. The world does, however, have the time and resources to keep Taiwan safe. That should be the focus of a rational foundry discussion not this type of geopolitical FUD (fear, uncertainty, and doubt).
Intel’s management and board must take responsibility and move decisively to stem the bleeding. The actions they’ve taken to date will not suffice. Numerous Intel watchers (including ourselves) have argued for several years that it must separate its foundry/manufacturing business from its design business. An Intel foundry operation, inside Intel’s corporate structure, has little chance of success.
I do not see an ounce of foundry experience amongst these Intel watchers. If you split Intel design and manufacturing it will be the death of Intel.
Nvidia, Qualcomm, Broadcom, and others are desperate for a second manufacturing option to TSMC, but will remain hesitant as long as Intel directly competes with them. Samsung, the only other advanced manufacturer of chips, has similarly discovered that many chip designers such as Apple and Nvidia tend to avoid its foundry because Samsung is a potential competitor. Intel’s management has also failed to prove that it can effectively run a foundry. Intel offered foundry services to the industry for two decades, never building a successful business. Missed targets and deadlines and management turnover do not inspire confidence.
Desperate? Are you kidding me? Nvidia, Qualcomm, Broadcom and many others grew up with TSMC. They are family. Would they like to have capable 2nd or 3rd sourcing ability that they trusted? Of course they would but that does not exist nor will it in my life time.
Intel’s CEO, Pat Gelsinger, is a true technologist who played an important role in the company’s storied past. Today, he’s faced with a difficult decision: whether to break up the iconic company. He already announced a plan to establish Intel Foundry as an independent subsidiary inside Intel. But this doesn’t go far enough. Emotions aside, the path for the U.S. and Intel should be clear.
The path you are suggesting is a suicide mission. Look at AMD and GF which was a complete spin out versus Samsung which was a virtual spin out. The only thing they have in common is that they both went head-on against TSMC and they both failed.
Since Intel’s design business remains profitable, it would need to establish a long-term supply contract with a newly created foundry independent of Intel.
If Intel design is allowed to choose their foundry partner based on technical/business criteria they will always chose TSMC. AMD is a great example. If AMD design had a choice they would have chosen TSMC right out of the gate and never looked back.
You have to understand that a relationship with TSMC is not just about manufacturing. It is a very close partnership that leverages hundreds of customers and partners. This collective design and manufacture knowledge base took 30 years to create and is unbeatable.
Just as AMD separated its manufacturing in 2009 and launched GlobalFoundries with a long-term supply deal, the new Intel design company would need to partially underwrite the foundry’s losses and guarantee sales for several years.
That long term agreement almost killed AMD.
Intel’s design company alone cannot support an independent foundry. Yet, Intel’s manufacturing operation is the only hope for maintaining the most advanced nodes on U.S. soil. An independent foundry would offer open access to all American, Korean, Japanese, and European companies to accrete sufficient volume and ensure its commercial viability.
Intel is the world's only hope? More geopolitical nonsense.
Since this is a public good (all of Intel’s current competitors and customers, as well as U.S. and global consumers, would benefit), the U.S. government (in cooperation with allies) can and should play a pivotal role.
I agree with this. Semiconductors are critical to modern life and most importantly sovereignty. Unfortunately, sending Intel on a suicide mission is not the answer.
The CHIPS Act gives the U.S. government $39 billion in grants to revive American semiconductor manufacturing. The government has already promised (but not yet disbursed) up to $8.5 billion in grants and $11.5 billion in low-cost loans for Intel. Today, Intel threatens to become this administration's Solyndra (the solar company, which went bankrupt after getting more than $500m in government funding). This would be disastrous, both for the government and Intel. The government has the leverage to force Intel down a better path—and it must use it now.
You cannot have an industrial policy without an industry: The government should be very clear on what it is willing to finance, including Intel’s corporate structure. This means that the government should insist that design and manufacturing at Intel be severed into two truly independent companies.
Sending Intel on an impossible mission is not in the best interest of anyone except Samsung. Unless of course you have Tom Cruise leading this mission. Even then I only give it small chance of success.
Time is not on our side. It took Intel less than a decade to lose its lead—and it will take at least five years to get back in the game. The pace of change in the chip industry demands quick action by management and the government. TSMC is not slowing down. The longer we wait, the less competitive we become.
At least five years? You cannot replicate what TSMC has accomplished in 30 years in such a short amount of time. This is absurd.
To be clear Intel will never compete head-to-head with TSMC. The foundry business is no longer solely dependent on superior process technology, it takes an ecosystem for a foundry to be successful and that cannot be copy and pasted. Ecosystems are developed through years of hard work and hundreds of billions of dollars in R&D. Ecosystems are all about trust and customer/partner loyalty which cannot be bought.
The whole premise of splitting Intel design and manufacture is that IDM foundries compete with their customers, correct? Do you think that is why Samsung Foundry is not successful? Because even though they are a separate division of Samsung they are still the same company?
Wrong!
Samsung Foundry is failing because Samsung is not trusted to deliver wafers on time and with acceptable yield. Why is that you ask? Because Samsung is trying to compete head-to-head with TSMC. The same mistake GlobalFoundries made until they pivoted. There have been some great pivots in the semiconductor industry, Nvidia is the best example. I'm trying to think of a successful semiconductor manufacturing company break-up, certainly not IBM or AMD.
Bottom line: Intel needs to pivot, they do not need to break up the company. Just my opinion of course but I have 40 years experience in the semiconductor trenches, more than half of that working inside the foundry ecosystem.
fortune.com
