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Intel Reports Third-Quarter 2025 Financial Results

hist78 said:
Moving money between left pocket and right pocket.
Click to expand...
I understand this is just margin transfer. But with the financials reported separately now for Products & Foundry, over time both business units will develop a culture to maximize their own profits. This will push Intel Products team to push more competitive products out with ASP uplift (or cost savings), otherwise they will lose profitability. Right now I believe, they are sourcing Intel 7 wafers at 0% margin for Intel Foundry (CFO said so too) but Intel 7 is likely a costlier process to fab (CFO said that too), so Intel Products team is likely paying lot more for a Intel 7 wafer than say TSMC N7/N6 wafer (as evident by Intel Products team choosing N6 for some of the IO tiles in client products instead of Intel 7 - this could also be due to IP availability on N6 that reduces time to market). So it was easy for Intel Product team to show >60% GM in 2021 (now >50% with foundry margin negative) . When more Intel products move to Intel 3/18A, they will have margin pressure, they need to figure this out for sure. Initially it will be just margin transfer between the Products team & Foundry team but over time it should improve.

Based on some estimates I have seen, Intel's ASP is roughly 18% lower than AMD (client+DC CPUs). Intel is selling at low prices to keep market share form AMD & compensate for slightly low performance. Once that performance gap closes (it is closing every gen- desktop gaming & server is where the gap remains), this ASP difference will close, that is a tailwind for Intel Products teams Gross Margin.
Also Intel Product team already got used to wafer pricing from TSMC with 50% Gross Margin built into it for say 15-20% of their wafer needs (total outsourcing now is 30% per Intel) . So initially that 50% gross margin is going to move to Intel Foundry as they bring wafer back to Intel Foundry. So I would not be surprised both Product margins hold at same level & foundry margin improve quite a while before product margins get hit.

There are lot of moving parts, difficult to predict which way it goes. We just need to wait and see.
 
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