Intel 10Q filing - We may cancel 14A if we do not win a large external customer

[Fred Chen]

I agree this was a very good question to which LBT mumbled some generic answer only for Dave to intervene and answer.
- If 14A development is cancelled, Intel would have to outsource its CPU tiles to TSMC on notebooks, desktops and server (why? because AMD & Qualcomm are going to be on A14 for their chips by then, so if Intel wants to compete, then they have to)
- Right now, only a niche LNL & low volume of ARL-H & ARL-S are on TSMC, Xeons are still on Intel nodes. Rest are all Intel 7 or Intel 3 based notebooks. Intel said they are outsourcing about 30% of their wafers to TSMC. So, we can say that outsourcing is going to be >>30% wafers if 14A is dead in 2028.
- So now 30% of wafer outsourcing led to fab underutilization and foundry operating margins tanking from -20% in 2021 to -60% in 2024. Intel is saying 18A ramped to full volume and bringing most of the outsourced wafers back to Intel will lead them to breakeven in 2027 on Intel volume alone + some contribution from Intel 16, 12 & adv packaging.
- Foundry node trajectory - Intel 16 is ready, Intel 12 ready in 2027. Intel 6 likely ready in 2028+. Intel 18A/18A-P ready in 2025/2027.
- Idle fabs when 14A dies (2028/2029), Most of Intel 7, Intel 14 & Intel 3 because no one else can use it anymore. Let's assume Intel 3 will have uses for Intel's own products for base tiles etc. Intel 18A\18AP will have partial use as well but since most of the volume was Intel in 2027, there is a big hole in 18A wafer volume.

So, they write down all the idle fab on Intel 7 & 14, maintain underutilized Intel 4/3 fab (1 fab in ireland) and underutilized 18A fabs (fab 42/52) and outsource >>30% of wafer volume to TSMC and expect everyone to believe that economics work? So >3 leading edge EUV wafer fabs underutilized, atleast 1 Intel 6 fab (prev 7nm) & 1 Intel 16 fab (prev 14nm).

Counter argument from David Zinsner - we will win more customers for 18A along the way to make up for the outsourced Intel volume, would that customer be as large as Intel to replace most of Intel's outsourced wafer volume? If not the 18A fabs will remain underutilized. [SO, Intel does think they have capability to win customers on a node after its own use 2 year down the line to recover R&D costs - why that thinking does not extend to 14A - no clue]

So, a bunch of fabs that are underutilized (losing money as they are fixed costs), and a significant portion of your wafer volume is outsourced to TSMC. Gee! I wonder what that situation reminds me of? The answer is Intel in 2024 but only the outsourcing plan is a stop gap.

LBT should make up his mind if he wants to be committed external foundry or take Intel fabless. This strategy as described now sounds more like one leg on a boat and the other on the shore and I don't see how that works financially unless they can win considerable external customers which begs the question then why not win customers for 14A too (even on wave 1 or 2 or 3 to recuperate the R&D cost)?

Well, CFO had also mentioned that with the 18A test chips they had lost some customers: https://www.reuters.com/business/in...-chip-manufacturing-tech-cfo-says-2025-05-13/.

 

[samwilde]

Intel could have been fabbing FinFET RISC-V chips for SiFive but they pulled the plug when they already had working silicon. Intel is just nearsighted as simple as that.

 

[Xebec]

Well, CFO had also mentioned that with the 18A test chips they had lost some customers: https://www.reuters.com/business/in...-chip-manufacturing-tech-cfo-says-2025-05-13/.

This quote was interesting, (article dated May 13

"It's a fair assessment that Lip-Bu isn't thinking about massive changes," Zinsner said during the call.

I guess 25% layoffs, and considering cancelling 14A and all future nodes aren't massive changes?

 

[XYang2023]

I think he knows what he is doing. Based on his comments on AI during the call, he understands it (but he did not explain his ideas clearly, a bit hard to decipher what he meant at the first instance):

Lip-Bu Tan - Intel Corporation | LinkedIn

Experienced Chief Executive Officer with a demonstrated history of working in the… · Experience: Intel Corporation · Education: Carnegie Mellon University · Location: San Jose · 500+ connections on LinkedIn. View Lip-Bu Tan’s profile on LinkedIn, a professional community of 1 billion members.

www.linkedin.com

 

[meo9725]

Consider it canceled then. No sane customer will drop TSMC in favor of Intel. Definitely not my company.

 

[meo9725]

Unless government policy or tariffs make it more economical. Was there a lesson anyone took away from cannonlake ? Who has track record to deliver and who is just talking maybe more humble now, LOL

Intel has been hiring mainly good talkers for the past 15 years, so they became very good at talking.

 

[swka]

Intel has been hiring mainly good talkers for the past 15 years, so they became very good at talking.

you can say that for a lot of large high tech companies. at least this time with Intel, there is an outsider that can bring something fundamentally different.