Intel to Focus on IoT and NOT Mobile?

The Intel Q4 investor call was last week and as Brian Krzanich approaches his 3[SUP]rd[/SUP] year as Intel CEO a new synergistic corporate strategy is emerging:

That strategy is also resulting in the evolution of our business model to focus on three key areas of growth: The Data Center, the Internet of Things, and Memory.

DCG, IoTG and Memory, delivered nearly 40% of Intel’s revenue and more than 60% of Intel’s operating margin in 2015. Additionally, these three adjacent markets delivered $2.2 billion in profitable revenue growth in 2015 alone. As we look ahead to 2016, we will continue to build on that strategy.

You should notice that Mobile, Foundry, and the FPGA businesses are not included here.

Certainly after spending BILLIONS of dollars on mobile Intel is not going to announce that they made a mistake and are leaving the business, but they did, they most certainly are, and it is a great move by Brian. If you look at the top three smartphone providers (Apple, Samsung, Huawei) all are now industry leading semiconductor companies with SoCs as good as or better than what Intel was able to do with Atom. That leaves fabless giants Qualcomm, Mediatek, and a handful of smaller players to fight for the remaining low margin-low growth merchant SoC business.

Bottom line: Intel Mobile will die a slow and silent death inside the Intel Client Computing Group.

Once Intel mobile is dead can Intel Custom Foundry take another shot at the merchant SoC providers? Maybe, but the “Apple using Intel” rumor that is flying around again is not going to happen this year or next. The foundries are now building and ramping their processes for SoC design and I do not see Intel doing that ever. Apple was the driving factor for TSMC 20nm, Samsung 14nm, TSMC 16FFC, TSMC 10nm, and Qualcom is behind Samsung 10nm.

As much as I would like to have another leading edge foundry in the mix I do not see Intel continuing down this bumpy road. Remember, this will be the third time Intel has gone in/out of the foundry business and this time it was started before BK became CEO so he does not own it. As I have said before, Intel should acquire fabless companies that are in emerging markets to better diversify and do what Intel does best, make chips! And this is what BK has done with Altera and will continue to do in IoT, my opinion.

Speaking of Alltera, I have had many conversations with FPGA professionals and the consensus is that Intel will focus on integrating Altera FPGAs into existing Intel business units and not aggressively pursue the remaining mainstream FPGA market segments. If so, some serious cuts will be coming to Altera, absolutely.

One final note, Intel 10nm was also not mentioned in the prepared statement which to me means there are more delays. In regards to process technologies (BEOL), TSMC 10nm can be considered a half node between Intel 14nm and 10nm. Based on conference papers TSMC 7nm BEOL will have a slight process advantage over Intel 7nm.

The TSMC 10nm PDK 1.0 is out now meaning that if all goes well TSMC 10nm wafers will start production in Q4 2016 and be ready for the iPhone 7s refresh in 2017. TSMC 7nm will follow one year later and hit the iPhone 8 in 2018 (TSMC 10nm and 7nm will use the same fabs/equipment so 7nm will ramp much faster than 10nm).

According to what I heard in the hallway last week at the SEMI Industry Strategy Symposium, Intel 10nm will be in full production in early 2018 and 7nm 2-3 years after that. The 2-3 years will depend on EUV which, according to a recent ASML presentation, is closer to 3 than 2 years.

Bottom line: At 10nm TSMC and Samsung will officially take the process lead from Intel and it will continue through 7nm, my opinion.

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