Intel: the chronicle of a death foretold or the revival of the phoenix

[Daniel Nenni]

Following Intel’s recent announcement of a two-year delay in the construction of its chip factories in Germany and Poland, Yole Group’s experts, Emilie Jolivet and Guillaume Girardin review today the reasons that have placed Intel in such an uncertain position.

Today’s chronicle is based on Yole Group’s collection of reports focused on the processor industry. Including the annual report, Status of the Processor Industry (2024 edition coming soon), the Processor Market Monitor, and many more, Yole Group’s analysts offer a comprehensive overview of this industry, highlighting the market evolution and business issues, all linked to the latest innovations. Have a break and deep dive into Intel’s fortunes.

Missing key market opportunities​

The undisputed global leader in the semiconductor industry since 1970 when it developed the first x86 microprocessor, Intel is now facing intense competition that has capitalized on emerging markets and technologies.

• • Mobile phones

By sticking to its x86 architecture, Intel missed out on the mobile phone market boom in the 2000s. This left the floor for new players, such as MediaTek and Qualcomm, to dominate the global market with ARM chips that offered the energy efficiency required by mobile devices.

• • Laptops

The laptop market has increasingly shifted toward ultra-mobile devices that require optimal energy efficiency, creating another opportunity for ARM-based technology. In 2020, Apple began integrating its own ARM-based chips, originally developed for iPhones, into MacBooks, marking the end of Intel’s role as Apple’s processor supplier. Qualcomm and MediaTek, with deep expertise in ARM technology, followed Apple’s lead, further eroding Intel’s dominance in this space.

• • Data centers

Although Intel’s Xeon chips still serve the data center market, its market share has been gradually whittled away by AMD’s Ryzen processors, which have been steadily gaining ground over the past decade.

• • Artificial Intelligence (AI)

Intel’s focus on CPUs caused it to lag behind in the growing demand for GPUs, where NVIDIA and AMD have secured a strong foothold. Initially categorized by Intel as niche products for gaming, GPUs have since become essential for AI applications, a field where Intel now has difficulty catching up with its competitors.
In less than 2 years, Intel has gone from earning more than half of the DC processing revenue to just 12% in 1H-2024.

Foundry services: bad timing​

To navigate this unsteady situation, Intel has opted to expand its semiconductor manufacturing capabilities and offer foundry services to external companies (More analysis in the latest Yole Group report: Overview of the Semiconductor Foundry Industry). However, three years later, the results have fallen short of expectations, with their main customer being… themselves.

Emilie JolivetBusiness Line Director of the More Moore activities at Yole Group
Despite securing significant recent deals with Microsoft and AWS, Intel continues to struggle to get its foundry model fully operational. It requires substantial cash flow – which is hard to sustain with a weakened core business – and hinges on advanced technologies they have not yet mastered.

With a development roadmap focused on the 18A technology node, Intel aims to outpace TSMC, but so far, their efforts remain at the announcement stage. Global initiatives like the Chip Act have revived the development of semiconductor manufacturing capacities in various regions of the world, like the ambitious 2nm initiative from Rapidus in Japan, putting even more pressure on Intel.

Despite these impactful strategic setbacks, Intel continues to survive, mainly due to its still-established leading position in the PC and data center markets. Additionally, the U.S. government is making significant efforts to support the company and help restore its strength. Last month, Intel was granted up to $3 billion in direct funding to manufacture chips for the U.S. Department of Defense.

However, this hasn’t prevented the company from implementing drastic measures: it plans to cut 15% of its global workforce, amounting to 15,000 job losses by the end of the year. Intel is also pursuing a strict investment reduction strategy, especially outside the U.S., as evidenced by the delayed construction of two European factories, one in Germany and one in Poland, as well as of its European R&D center for high-performance computing (HPC) and AI development, originally planned to be set up in Paris-Saclay.

Guillaume GirardinTechnical Director at Yole Group
The uncomfortable situation in which Intel finds itself today is pushing them to rethink their strategy, their investments, and to seek partners that could help them get back on track and provide the necessary financial resources for their transformation.

The recent announcements of acquisitions by Qualcomm and investments by Apollo point in this direction. Would a merger between Qualcomm and Intel make sense? Most certainly, from the perspective of product complementarity and market exposure; while Qualcomm is very well positioned in the mobile market, Intel has historically been focused on the PC and server markets. The former has no production capabilities and relies entirely on its supply chain in Asia, while the latter has fabs worldwide, including production capacity in chip packaging.

Could the merger of these two giants happen? Yes, this transformation works on paper, but it requires careful consideration of several factors: regulatory approval, cultural integration between the two companies, and alignment of strategic goals. Both companies would need to evaluate how their respective technologies and business models could complement one another while managing operational challenges that could arise from merging two large, complex organizations.

Related press article​

Intel stock jumps on plan to turn foundry business into subsidiary and allow for outside funding

About the authors​

Emilie Jolivet is the Business Line Director of the More Moore activities at Yole Group.
Based on her valuable experience in the semiconductor industry, Emilie manages the expansion of the technical and market expertise of the memory, computing & software team.

In addition, Emilie’s mission focuses on the management of business relationships with semiconductor leaders and the development of market research and strategy consulting activities inside Yole Group.

Prior to Yole Group, after an internship in failure analysis at Freescale (France), Emilie was an R&D engineer for seven years in the photovoltaic business, where she co-authored several scientific articles. Emilie then worked at EV Group (Austria) as a business development manager in 3D & Advanced Packaging.

Emilie Jolivet holds a Master’s in Applied Physics specializing in Microelectronics from INSA (Toulouse, France). She also graduated with an MBA from IAE Lyon.

Guillaume Girardin Ph.D. works for Yole Intelligence, part of Yole Group.
Guillaume’s mission is to ensure the quality, consistency, and evolution of Yole Intelligence’s products and services related to the semiconductor industry.

He is also an executive representative of Yole Intelligence during conferences, trade shows, and key customer interactions. In this cross-functional role, Guillaume is deeply involved in several major projects for which his role is to evaluate and inform with strategic insights into the market, technologies, customers, and competitors.

Guillaume started as a market and technology analyst at Yole in 2014, progressed to Director of Photonics and Sensing division, and a few years later Market Intelligence Director. He holds a Ph.D. In Physics and Nanotechnology from the Claude Bernard University Lyon 1 (Lyon, France) and an M.Sc. in Technology and Innovation Management from EM Lyon School of Business (Lyon, France).

https://www.yolegroup.com/strategy-insights/intel-the-chronicle-of-a-death-foretold-or-the-revival-of-the-phoenix/

 

[blueone]

Yet another really dumb article. Are you posting these just to show how silly and shallow your competition is?

Intel did not miss the laptop market or the data center market. We all know about phones and AI. As for the foundry comments, even dumber.

 

[Daniel Nenni]

Yet another really dumb article. Are you posting these just to show how silly and shallow your competition is?

Intel did not miss the laptop market or the data center market. We all know about phones and AI. As for the foundry comments, even dumber.

Look at the education on these people! And clearly they have no idea what they are writing about. It truly amazes me. SemiWiki is the only place with working semiconductor professionals. The Yole Group, TrendForce, all of these sites lack the actual semiconductor experience to understand semiconductors much less the companies that make them.

 

[blueone]

Look at the education on these people!

Early in my engineering management career I admit I was overly biased towards people with advanced degrees from elite schools. It didn't take long for me to notice that sometimes these people were the highest performers and lived up to my expectations set by their backgrounds. But just as often they didn't. Sometimes the real high performers were the people with BS degrees from places like San Jose State, UT Austin, or Arizona State. After a while I looked for people who could impress me with their broad knowledge and passion for the fields I was hiring for. Once in a while I did find that person who had it all, like one with a PhD from Caltech I'm thinking of at this moment, but in my experience there just isn't that correlation I used to expect.

 

[osnium]

Early in my engineering management career I admit I was overly biased towards people with advanced degrees from elite schools. It didn't take long for me to notice that sometimes these people were the highest performers and lived up to my expectations set by their backgrounds. But just as often they didn't. Sometimes the real high performers were the people with BS degrees from places like San Jose State, UT Austin, or Arizona State. After a while I looked for people who could impress me with their broad knowledge and passion for the fields I was hiring for. Once in a while I did find that person who had it all, like one with a PhD from Caltech I'm thinking of at this moment, but in my experience there just isn't that correlation I used to expect.

UT Austin is easily a top 10 engineering school and ASU is in top 25. I am not surprised that you have high performing alumni from those places.

 

[BruceA]

Early in my engineering management career I admit I was overly biased towards people with advanced degrees from elite schools. It didn't take long for me to notice that sometimes these people were the highest performers and lived up to my expectations set by their backgrounds. But just as often they didn't. Sometimes the real high performers were the people with BS degrees from places like San Jose State, UT Austin, or Arizona State. After a while I looked for people who could impress me with their broad knowledge and passion for the fields I was hiring for. Once in a while I did find that person who had it all, like one with a PhD from Caltech I'm thinking of at this moment, but in my experience there just isn't that correlation I used to expect.

BK is from San Jose State, case rested

 

[OneEng]

Early in my engineering management career I admit I was overly biased towards people with advanced degrees from elite schools. It didn't take long for me to notice that sometimes these people were the highest performers and lived up to my expectations set by their backgrounds. But just as often they didn't. Sometimes the real high performers were the people with BS degrees from places like San Jose State, UT Austin, or Arizona State. After a while I looked for people who could impress me with their broad knowledge and passion for the fields I was hiring for. Once in a while I did find that person who had it all, like one with a PhD from Caltech I'm thinking of at this moment, but in my experience there just isn't that correlation I used to expect.

I once told a PhD job applicant "A PhD and a dollar twenty five will get you a coke in the cafeteria here". I strongly rely on accomplishments, design philosophy reasoning, and business case rationale in my interviews for senior engineers and architects. The degree is .... nice, but rates pretty far down the totem pole on my list of considerations.