It's not much of an article, but the question is certainly on everyone's mind.
The crazy part is that this is all after how much Intel has benefitted from the CHIPS act (financially, not strategically, as it's too soon for that). They're unable to compete even with unfair advantages funded by the American tax payers.
From everything I've heard and read, Gelsinger is a great CEO and a good person to have steering the ship during this crisis. He's been back 3 years, but a behemoth the size of Intel (with the burden of all the strategic mistakes it made in the Krzanich/Swan era) probably takes a lot longer than that to course correct.
The thing is, it's not in anyone's interest for Intel to fail. There are so few competitors at the top end of the scale that any one dropping out would be catastrophic for the market and the tech/industry. I don't know about the INTC stock price, but I pray that the company finds a way to keep relevant and competitive.
(At the same time, I'm reminded of all the juggernauts of the 70s and 80s and how incredulous it was that they ceased to exist and am reminded of the all too real possibility that this could be the beginning of the end for Intel.)
>they're unable to compete even with unfair advantages funded by the American tax payers.
In countries like South Korea where industrial subsidies have been used successfully this was only the case because governments at the same time enforced export discipline policies, meaning they made subsidies dependent on companies being able to meet export targets which is a big indicator of competitiveness.
Given that the US is turning insular at the same time as its trying to subsidize domestic industry and increasingly putting trade barriers and tariffs up across several industries you basically have the perfect combo for a disaster.
> this is all after how much Intel has benefitted from the CHIPS act
From what I've read they haven't actually received that $8.5B yet. The other thing to consider is that they're they're needing to spend $100B to build fabs that are competitive with TSMC - and they need to do it kind of all at once here because they underinvested in the 15 years prior due to bad management. $8.5B is kind of a drop in the bucket. $100B is a huge amount for a private company to spend - possibly the largest CAPEX ever. And the time from when shovels hit the dirt till the time a fab is in operation is about 5 years.
Meanwhile Apple is over there sitting on $160B in cash wondering what to do with it. And Apple is the one facing huge geopolitical risk if something happens to Taiwan. It seems like a shotgun wedding between Apple and Intel could be beneficial for both.
Apple built their own chips to get away from Intel. They might start thinking about some sort of joint venture to get a TSMC-US working, but they have no interest in working with Intel.
Apple does not build their own chips. TSMC builds them for them. Apple designs chips that are fabbed by TSMC. Apple supplies the recipe, TSMC supplies the ovens.
> they have no interest in working with Intel
They do if they would like to have a safe, domestic supplier insulated from geopolitical instability. Also in the scenario I mention (some sort of merger or acquisition) they'd be owning Intel and driving it in (hopefully) a beneficial direction.
Semiconductors are an important strategic manufacturing capability. Strategic in a “you want homegrown foundries to make smart-bombs” sense, and also in a “chips are a basic component that every other industry uses” sense.
Their main competition is TSMC which also gets subsidies. Everybody who wants semiconductor manufacturing pays up. CHIPS is the US taking the first step toward getting back in that game. It isn’t an unfair advantage really, it is an attempt to level the playing field.
Is Intel the ideal recipient? Not sure. A pure foundry seems like a better (more strategic) candidate to me. But no US foundry is that competitive, right?
Sure, I don’t disagree with the basic premise. I actually wasn’t passing judgement (despite my wording!), rather I was merely trying to say that despite such a massive unexpected windfall, their finances are still in the gutter.
I worked at Intel during the BK days, and their decline was already well under way at that time. What's happening now seems like a natural progression.
I worked at Intel during the AG days, and by far the most noticeable change is the larger number of non-profitable activities Intel is engaged in. 130,000 people is just too many for the products they sell and the revenue they generate.
If they had 70,000 employees, their revenue and profits would look great. The question they have to answer is can they do that revenue with 70,000 people, not 130,000.
Maybe 'BK' was kind of a warning (finance people say 'BK' as shorthand for bankrupt). But he wasn't the only bad CEO they had. Swan wasn't even from the semiconductor industry. Otellini told Jobs 'no' when Apple came inquiring about Intel fabing an ARM chip for their new iPhone thingy. It's been a series for rolling disasters since the early aughts, really.
There is always Samsung and if Intel fails, there might be a more aggressive push from customers to give Samsung more business to ensure that they are successful.
To do a fab build out and restructuring of this scale clearly they need to spend a lot of money. In that context the numbers from the financial report do not seem that shocking. This all seems to be quite an overreaction in the market. They still have a lot of revenue. They are still dominant in terms of market share. Their CPU products are competitive and reliable despite the process disadvantage. Yes there are issues some percentage of the consumer CPU high end but I'm sure the investigation will be completed and the right thing will be done, they cannot afford the reputational risk of not doing so.
I'm more concerned about how well 18a and beyond is coming on. Also how well is the sales side and client support for this going? I was thinking they were working more with TSMC to learn how this works from a client perspective so they can build something similar.
Regarding AI. Technically speaking isn't the AI hardware largely cut and paste? A much simpler CPU of which there are a few thousand copies. With the expertise they have in RTL design it does not seem that difficult.
That said I do not think that parallel compute of this nature is going to be future of AI, it is too expensive in terms of power. I'm sure a much more efficient structure will be designed in the coming years, e.g. neuromorphic.
I am not sure. While Intel still has a dominant market share in personal compute, it’s data center market share has been shrinking for years and Intel doesn’t have a convincing story why that would change.
The main issue I see for Intel is that they are trying to catch up in multiple areas at the same time against more specialized companies with more resources, and fend of new architectures like ARM.
Look at the segments:
- Foundry: TSMC is way ahead, has the right culture and is better capitalized. Even Samsung is ahead.
- CPU Architecture: Compete with AMD on the x86 side and with Apple, Google and the likes with ARM architectures.
- GPU: Compete against NVIDIA and AMD.
- AI/NPU: Compete with NVIDIA, AMD, Qualcomm,…
All those companies were smaller than Intel in the past, and Intel couldn’t keep their advantage. Now, those companies are ahead and in a better overall position.
Nothing is impossible but I can certainly see why investors are skeptical, especially given Intel‘s track record in the past few years.
> This all seems to be quite an overreaction in the market.
This is the problem with our current brand of capitalism. It's only able to look ahead a quarter or two. Some things (like semiconductor fabs) require a huge amount of spending and the payoff doesn't come for about 5 years. And things like fabs are very necessary to keep our economy rolling. Meanwhile the markets want a quick fix and easy payoffs.
The people who built Intel all died and faded away from the company. Those people understood the razor sharp edge you had to maintain to stay on top in that world.
It's important that Intel continues to be successful not because I've any love for the company which I haven't but because it's essential that it does so for US manufacturing. If for nothing else Intel has to be viable for strategic reasons.
I've never liked Intel since the days when it partnered with AMD to make 'complementary' chips and it broke that agreement leaving AMD to struggle for decades (it's why whenever given the opportunity I've always chosen AMD chips). Who remembers the double-page ads in Electronics and Electronics Design with Intel ads on one page and AMD on the opposite stating that their designs complemented each other? (Seems to me if that partnership had continued then US chip manufacturing may well have unassailable.)
I don't like Intel nor its lousy ethics but it has to succeed as bigger issues are at stake.
More like 2 decades. They took that whole 90s Wintel monopoly for granted thinking the easy money would keep rolling in forever. A cautionary tale for Nvidia.
NVIDIA has taken that cautionary tale to heart! They rode the gamer -> scientific -> crypto -> AI wave like a champ and at this point their mote on the training GPU side feels insurmountable. Their competitors’ saving grace is that it’s much easier to port inference code to other GPUs.
My uninformed gut says Intel was more screwed by missing mobile than was immediately obvious. Sure, it lost them a bunch of money to not be in cellphones.
But also, as transistors have gotten smaller and designs have gotten more complex, yield, (which was always important) has become a massive problem. Chiplets are the solution, a defect just destroys one chiplet instead of the whole chip. Designs should use more chiplets, the smaller the better.
Intel’s trick of making giant monolithic designs turned into a liability. The smartphone fab, it turns out, is making chips that are perfectly fine for desktops and servers if you jam enough in one package. Epyc was the writing on the wall.
Certainly getting into mobile would have taught them how to compete in a very different market with lower margins and that would have put them in a better position today. Intel was addicted to the easy money of the Wintel days and has had a hard time transitioning. Otellini's decision to not supply Apple with cpus for the iPhone was a huge mistake. (I seem to recall that the calculations to determine that it wouldn't be profitable might even have been based on a mistake in a spreadsheet, but that's probably apocryphal)
I've never worked there, but according to "The Story of ISPC," Intel has a very cutthroat culture. Some extracts:
> The problem was that just a few jerks, especially in positions of power or influence, could fuck you up real good.
> Intel had more than its share of them and therefore, everyone at Intel balanced some amount of technical work with some amount of politics work. You had to. Politics was more than the standard “advocate for yourself” stuff; at minimum it was periodically defending yourself against attacks from others who wanted your territory and would try to get your project shut down so they could take it.
> Some people there approached their work with little in way of technological contributions, but a lot of politics. It turned out that that could be a perfectly successful career strategy—undermining others as necessary to maintain and advance your position without ever actually delivering much of substance yourself. Those were the jerks.
> As it turns out, some teams would jealously guard their source code, only making binary releases available to other teams at Intel, and only at well-defined delivery points. It was one defense against the jerks.
> Here’s how it went: if you were working on something that others wanted to attack, sometimes they’d take the in-progress version of the system and pick it apart, finding a bunch of examples where it didn’t yet work well, and putting together an argument that your thing was in terrible shape wasn’t working, and thus should be canceled.
> And sometimes that sort of tactic actually worked; management was shockingly receptive to this sort of hysteria. Maybe it was that they were too far away from the technology to be able to evaluate the arguments on their merits, or maybe again it was an appreciation for gladiatorial combat as decision making process.
> The best case scenario was that the your team would have to spend a lot of time convincing management that they were actually on track and that things were fine. The easier thing was to just not share your code in the first place.
This is unfortunately very common in the corporate world, especially once an organisation grows to a certain size. It's the nature of animals to be territorial and competitive so there is a primal force behind this. But humans are intelligent and build societies. Good societies understand game theory and incorporate cooperation to maximise benefits for everyone in the long run.
I feel this doesn't happen well enough within corporate societies which tend to be much more vicious and hostile in their own realm compared to the outside world. There is a lot of content out there on org building, leadership and what not but I've not come across anything which addresses this fundamental issue. What kind of structures do you need to build to incentivise high degrees of cooperation and discourage unhealthy competition? What would the evolution in terms of next generation of org structures look like?
Do you think the US govt should just give up on Intel, retract the CHIPs money from them and give it all to Samsung and TSMC? Having domestic fabs is nice but if a company is incompetent, it’s a waste of taxpayer money.
Why give it to Samsung or TSMC? That money could be used to seed a different domestic company. I don't think domestic fabs are just a "nice to have". Given how dependent we are on these sorts of chips, I think having a domestic producer is critically important.
Also, Intel and GF’s struggles to advance beyond could suggest that domestic technology development teams are simply not capable of going good process development. The only options is to rely on Samsung and TSMC to build semi successful fabs in the US.
Sure, but (just brainstorming here, not espousing any strong opinions) there are more fab companies in the US than people think. They're just making lower-density chips rather than the high-end stuff. You wouldn't have to start from nothing, you could build on something that already exists.
My primary point and strong opinion here is that I don't think the issue is as binary as a decision to prop up intel vs a decision to give up on domestic production. There is a whole world of other possible options.
Particularly since, no matter what, there is no solution to this problem in the short term. Whatever is done, it will take a long time to produce real fruit.
Arguably half intel's problem is that their fabs are not performing like they used to. The first 10nm chips were disasters, the endless 14nm revisions as a stopgap, and now the various issues with intel 7…
Agreed. That’s the heart of the questions. If Intel’s fabs are not performing as they did in the past, why should the taxpayer subsidize that organization through the CHIPS Act? It seems like rewarding technical incompetence and if the fabs don’t deliver, it’s not good for national security either.
I'm not a big fan of forcing private entities to relinquish their property. There has to be a really solid reason for it (such as that the owner is going to use it in a way that is harmful to others).
Should? Yes. Can? No.
Also TSMC got sick of all the bullshit and declined the future US partnership fabs. Probably due to the unions throwing their weight around and threatening to delay if they didn’t play ball. Someone with national security authority should have sat those idiots down and had a chat.
Years ago, I saw a comment which wrote that Intel significantly reduced the QA team so that Intel will suffer for the defective product in the near future.
This checks out with how many sapphire rapids steppings there are, which is the current generation of server chip.
There is A0, A1, B0, C0, C1, C2, D0, and E0-E5 which is the current production stepping.12 total revisions. Why test before getting it back from the fab!
In 2001, I did an internship at IBM. Ever since then, I have been convinced IBM should be going out of business any day now. Since then AWS was formed, and ate IBM's lunch. But IBM kept going. To my complete amazement, they are still in business, and doing fine. They had always seen less promising than Intel, and yet they are still there. I think Intel is undervalued, and is better positioned to make a come back.
IBM certainly is still a profitable company, but it's a shadow of what it used to be. I'm absolutely not saying that what they are is bad or substandard, but talking in terms of how influential/powerful/dominant they are in the industry. I think that the worst case for Intel is very similar. I also think that it's looking more likely with every year.
IMVHO seeing what's public Intel have simply dream a world of big datacenters for AI and have ended up against the wall of reality: they desktop products sell well, even with the longest tails of scandals, the datacenters + endpoint, the cloud+mobile world does not take off as netbooks in the past.
The lesson learnt for me is that's about time to REALLY give up keeping the old mainframe + dumb terminal paradigms to came back to the desktop one simply telling the GAFAM: "you are done, your business model can't keep up" and financing a good revolution.
Intel in the past have done something nice with the Ultrabook design, it's about time to care of pure desktops.
I don't quite understand how Phoenix, AZ, became the focus for chip fabs in the US, and even the recent CHIPS-backed TSMC investment.
AZ does not have a lot of water, and the Colorado Basin treaties expire next year. There are interests from existing holders of water rights, the 7 US states, several Federal agencies (BLM, Army COE) and the international aspect with Mexico.
I assume the negotiations are challenging and at some point, the Feds will step in, to direct water supply to chip fabs, rather than golf courses and almond groves.
Intel looks severely undervalued compared to every other chipmaker… until you look at how completely behind they are… and then you realize that their value is mostly geopolitical. I can make a case for investing in them based on their relationship with US gov alone but even then it looks like it will be years before Intel has chips that can compete.
If they have any luck as a foundry service, it might end up being for the better that their consumer chip business dries up. Why buy ARM licenses when you can make ARM licensees pay you instead?
Umm, the article is whining that Intel isn't selling any "AI" chips.
They don't seem to care about the recent voltage scandal or any other QA problems Intel may have now. Or that the high end CPUs are better used as space heaters + vacuum cleaners.
