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I’d like to hear what @MKWVentures thinks since he was there.
From my perspective as an outsider, I believe Intel could have implemented many cost cutting and productivity improvement initiatives long ago, similar to the measures Lip-Bu Tan is executing today. As an IDM, Intel should, in theory, enjoy a higher net profit margin than a pure play foundry like TSMC, because Intel can capture the added value from the final products. However, Intel’s overall costs have remained very high for a long time, especially compared with TSMC. This was true even when TSMC wasn't as dominant as it is today.
TSMC vs. Intel annual net profit margins (2004–2024)
What are some of the biggest differences between how Micron operates vs Intel Foundry? Is one key difference the fact that Micron does most of its manufacturing outside the US?
It is my personal opinion that Intel Foundry is working to change their operational model so that they can show this degree of flexibility. The guy calling the shots was brought in from Micro, so he should have some idea about what needs to change to make Intel more flexible and nimble.
In my opinion the only really hard thing about changing people's behavior is finding the patience to wait for the change to take place. If leadership wants to see a change all they have to do is reward the behaviors they want to see. But they have to do this consistently over several years. People are generally pretty smart when it comes to figuring out how to get ahead. Once it becomes clear what is being rewarded the desired behaviors will follow.
I actually think this could be done more quickly, but an annual reward cycle (promos, raises, stock awards, etc.) will cause the pace of change to move more slowly, since many will not believe the change in expected behavior is going to last. In short you have to stick with it long enough to convert the skeptics to believers. And you have to be willing to suffer though a period of worse before better that isn't very palatable to most executives. I guess it remains to be see if Lip-Bu Tan has the stomach to tolerate that with Intel Foundry. His work at Cadence leads me to believe he does, but only time will tell.
And if you think that the scale of the problem prevents it from being possible, I would hold up Satya Nadella's work at Microsoft as a proof point that changes can be made even in very large corporations.
