Intel splits Foundry from Design

[tooLongInEDA]

Once the equipments were bought, it is sunk cost. Depreciated or not, it is just an accounting concept. They have a strong incentive to fully utilize these DUV machines rather than letting them sit idle.

To see how bad the competition can be, In H1 2024, China has spent more money on chipmaking equipments than TW, US, KR, JP combined. https://www.benzinga.com/markets/as...-korea-combined-what-it-means-for-nvidia-asml

Talking about anti-dumping meausures, EU cares about cars much more than where semis get made, as EU are large car makers themselves, but not so much in terms of semi.

If and when the Chinese fabs win their race to the bottom, they'll discover there are no prizes for finishing first ...

These are not just accounting concepts. Eventually you run out of money. As many Chinese chip companies already have. If we had reliable accounting figures and could net up the total investment in Chinese fabs and compare to their total cumulative profits we'd see a very interesting picture.

 

[MKWVentures]

In theory, they can raise more capitals by selling foundry stocks(which will be cheaper than design + fabrication company stocks) while keeping foundry ownership(keep 51% of stocks). But in order to pursuade investors, Intel design still needs to commit large volumes of wafers.

A subsidiary is not independent and it does not have stockholders. It is wholly owned. everyone reports to Pat

Intel Malaysia is a subsidiary. Intel Ireland is a subsidiary

The finances are consolidated.

Unless there is an IPO with 50% non-Intel ownership.... it is not independent.


What exactly is changing?

Now if it is a subsidiary, held for sale... that is different..... (Like FPGA, NAND, Mobileye, etc).

I was hoping Intel would admit to a realistic fab and foundry roadmap but I see that is not going to be announced

 

[jorgequinonez]

If and when the Chinese fabs win their race to the bottom, they'll discover there are no prizes for finishing first ...

These are not just accounting concepts. Eventually you run out of money. As many Chinese chip companies already have. If we had reliable accounting figures and could net up the total investment in Chinese fabs and compare to their total cumulative profits we'd see a very interesting picture.

I was just thinking of how Chinese companies are cannibalizing each other on photovoltaics and overspent on skyscrapers (the real estate bubble; there are entire cities that are empty). While it's not an apple to apple comparison, I wonder how much of this is applicable once the PRC fabs starting competing against each other.

 

[Artificer60]

The finances are consolidated.

It seems that there are different types of subsidiary. It was explicitly stated that IF would be an Independent subsidiary. In that case the finances are not consolidated and the assets are completely independent. It also means that there will have to be one independent board member. We can only hope it will be someone with some deep foundry/semi-manufacturing expertise.

INDEPENDENT SUBSIDIARY means any Subsidiary of the Issuer which (i) maintains separate books and records from the Issuer and observes all corporate formalities, (ii) pays all of its liabilities out of its own funds, (iii) in all dealings with the public identifies itself under its own name and as a separate and distinct entity, (iv) does not commingle its assets with those of any other Person, and (v) includes at least one independent member on its board of directors.

 

[MKWVentures]

It seems that there are different types of subsidiary. It was explicitly stated that IF would be an Independent subsidiary. In that case the finances are not consolidated and the assets are completely independent. It also means that there will have to be one independent board member. We can only hope it will be someone with some deep foundry/semi-manufacturing expertise.

INDEPENDENT SUBSIDIARY means any Subsidiary of the Issuer which (i) maintains separate books and records from the Issuer and observes all corporate formalities, (ii) pays all of its liabilities out of its own funds, (iii) in all dealings with the public identifies itself under its own name and as a separate and distinct entity, (iv) does not commingle its assets with those of any other Person, and (v) includes at least one independent member on its board of directors.

lets see what actually happens. The first test is simple: Are Intel Product groups allowed to choose TSMC for production anytime they wish? They claimed they were back in 2021, reports are that they are now (since Feb 2024) directed to keep Intel Fabs loaded. We will see examples of this mid 2025.

 

[count]

If and when the Chinese fabs win their race to the bottom, they'll discover there are no prizes for finishing first ...

These are not just accounting concepts. Eventually you run out of money. As many Chinese chip companies already have. If we had reliable accounting figures and could net up the total investment in Chinese fabs and compare to their total cumulative profits we'd see a very interesting picture.

It might be a feature vs a bug. Let's say China kills profit margins on the trailing edge (and many Chinese foundries will fail in that process no doubt). I think that will also slow down progress on the leading edge, because if you aren't making money on trailing edge nodes, you may need to extend the life of leading edge nodes to recover the development costs. This is already happening because of the increasing cost of leading edge node development.

If you look at the way China has come to dominate almost all aspects of production, from steel to solar panels, yes it's come at the cost of many failed companies and possibly billions of dollars, but they have succeeded in weakening the industrial base of their competitors. Maybe that's the real goal?

 

[lispwright]

The first test is simple: Are Intel Product groups allowed to choose TSMC for production anytime they wish?

Wouldn't it be the other way around? If it's truly independent, it would be able to turn down part or all of an Intel Product order in favor of a outsider's foundry order.

 

[MKWVentures]

Wouldn't it be the other way around? If it's truly independent, it would be able to turn down part or all of an Intel Product order in favor of a outsider's foundry order.

Yes they could. But the difference is that (according to Intel) the product group is successful and the foundry group is not. And the product group is using TSMC to the tune of $10B per year. And wafer sales by Intel to all customers are currently <$600M per year.

So I think we are pretty far away from Intel foundry turning down any customer. but maybe I am wrong LOL

 

[trah]

Wondering if it is linked to the 3 billion dollars or stock exchange speculation

 

[Fred Chen]

They've already garnered some interest in 18A from Microsoft, Faraday, Ericsson, even Broadcom (too much maybe), before finally Amazon, but still they say "it’s time to shift from a period of accelerated investment to a more normalized cadence of node development and a more flexible and efficient capital plan."