The large information this previous week got here in the type of Intel’s announcement of its new technique, doubling down on its fab and foundries. We wrote about it, however we need to develop on what we see as the defining problem the firm’s initiative faces – how one can cope with foundry prospects. Put merely, Intel has arrange a brand new division to function a Foundry, a producing line for different firm’s designs. This has been a evident gap in Intel’s line-up for a very long time. They have tried repeatedly to enter this enterprise with no success.
Guest writer Jonathan Goldberg is the founding father of D2D Advisory, a multi-functional consulting agency. Jonathan has developed progress methods and alliances for firms in the cellular, networking, gaming, and software program industries.
There are some causes to suppose this try could also be extra profitable. Intel Foundry Services (IFS) is a completely separate group, reporting on to the CEO. Despite its current stumbles, Intel nonetheless has immense inner expertise. It additionally has superior packaging capabilities, which we uncared for to say, however might be crucial. And crucially, they’ve a transparent path for fixing their manufacturing course of.
At its coronary heart, Intel has all the time been a producing powerhouse. In current years, they misplaced their manner. And in his remarks their CEO pointed to their very own actions, ignoring the recommendation of their key provider ASML, for his or her present place. All indicators are that Intel ought to be capable to catch up.
But a key piece of this technique will likely be getting Foundry Services (IFS) to work. Without this, it will likely be onerous for Intel to maintain its fabs totally utilized and thus worthwhile. To do that, Intel has to unravel its cultural issues and lack of customer service capabilities. We mentioned this in depth, however we need to discover a key a part of this right here.
We have labored with all the main foundries over the years, and loads of the smaller ones. When we get requested “how do you choose a fab?”, we have now a two part-answer.
First and foremost is manufacturing course of, this dictates all different decisions. But then how to decide on between two foundries at the similar course of node – say TSMC versus Samsung at 7nm? The reply just isn’t value, which for some motive everybody expects to be the reply in the world’s most complicated technological subject.
Customer service looks as if a very squishy standards for the world’s most complicated technological fields, but it surely issues tremendously.
Instead the reply is customer service – how straightforward is it to work with the foundry. (If you need to know the way TSMC vs Samsung shakes up on this scale, contact us for an offline dialogue.)
Customer service looks as if a very squishy standards for the world’s most complicated technological fields, but it surely issues tremendously. And the coronary heart of customer service is offering prospects with all the issues they should construct a chip profitably. This means giving prospects entry to property like software program instruments and libraries and ensuring prospects have entry to the finest the foundry gives. Will Intel do that? Can they do that?
The reply is much from clear. First, there are the cultural points. A variety of these intangible property have been handled as the firm’s crown jewels – intentionally made onerous for others to entry. How is Intel going to resolve what to share? And mechanically, how are they going to share them?
TSMC, as an illustration, has spent many years working with firms like Cadence and Synopsis to make the transition from chip design to chip manufacturing as frictionless as doable. There are some very actual logistical challenges for Intel on this entrance. Keep in thoughts that right now Intel fabs most chips from the firms it has acquired at different foundries. So even sharing internally just isn’t actually taking place.
But extra importantly how will the firm resolve how one can allocate fab capability? We surprise how will Intel prioritize its personal merchandise versus these of shoppers? Will they arrange some form of inner accounting system the place Intel’s CPU merchandise should bid in opposition to exterior firms? In follow, these sorts of issues hardly ever work effectively (apart from Amazon). This is theoretically how Samsung works, however probably not in follow.
And this isn’t a small query. Foundry capability usually will get booked up months if not a yr upfront. With Intel’s CPU merchandise bleeding market share, they may deliver immense strain to bear on getting their merchandise to the head of the queue. And keep in mind, Intel’s whole product technique is constructed round very tight integration with manufacturing, so it’s nearly a certainty that the firm will see some type of margin hit from this course of, and never simply one-time restructuring fees, however a systemic transition in gross margin price buildings.
Ultimately, the reply will relaxation with prospects. Which raises the very attention-grabbing query of who precisely will signal as much as be an IFS customer? We speculate that Apple is a possible candidate. As a lot as Apple is now producing a CPU aggressive to Intel’s CPU, Apple just isn’t actually an Intel competitor. Apple has misplaced a number of religion in Intel lately, however they may base their determination on Intel’s capabilities. So there’s a first rate probability that if Intel can get again on monitor Apple would join.
But who else? We can rule out a number of firms – notably AMD and possibly Nvidia.
These firms are direct opponents with Intel’s core CPU and GPU merchandise (as a lot as Intel competes in GPUs). Some time in the past on Twitter, we speculated that Qualcomm might be a candidate. They do not actually compete immediately right now. That could change as each firms have competing ambitions in an automotive market that’s nonetheless years away. However, there’s a large motive why Qualcomm and lots of others could need to join with Intel – let’s name that motive ‘patriotism’. Intel made an enormous deal about the US’ reliance on a semi provide chain all primarily based inside missile vary of China. It isn’t any secret that Intel has been lobbying the US authorities onerous for subsidies. So many firms could join IFS to wave the flag. This might also persuade firms like Broadcom and Marvell to enroll.
The different large pool of shoppers are all these Internet firms constructing their very own chips. The hyper-scalers all have good causes to think about going with Intel. For one, as disruptive as they might be, they don’t seem to be the largest patrons of foundry capability. They purchase a number of chips, however none but rank in the prime ten of TSMC prospects. If IFS does it proper, they will be very aggressive in pulling out all stops to courtroom these prospects.
For Intel, their worth rests in the quantity they convey as a lot as the optics of getting a press launch from such outstanding firms. This is hard as a result of Amazon, for one, now has a aggressive line of Arm-based CPUs. Would they need to fab these at Intel whose chips they’re displacing? The similar goes for Google who makes their very own AI accelerators which compete in opposition to these made by a few of Intel’s current acquisitions. And what about the Chinese cloud service suppliers Ali, Tencent and Baidu? They may be intrigued by Intel’s courting, however right here the patriotism argument works in reverse. Do any of them need their title hooked up to saving America’s fab capabilities? On stability, we predict a few of these firms will a minimum of be keen to ship some quantity Intel’s manner, which collectively could also be sufficient to move the needle.
We suppose this leaves us in the realm of IFS is presumably viable. If Intel can kind out its manufacturing course of, and if it will probably discover the funds it wants (see above re:US authorities), and if it will probably construct up a real customer service functionality, and do all if that in beneath three years, then IFS ought to work.
Masthead credit score: Nguyen Dang Hoang Nhu