Intel is on life support. Can anything save it?

https://www.economist.com/business/2024/09/12/intel-is-on-life-support-can-anything-save-it

by jspann • 2 years ago

72 118 2 years ago

elric2• 2 years ago

Intel being on life support is a bit of a stretch. They are investing an awful lot of money, and it's going to take time for those investments to pay off.

I worry more about their inept handling of recent CPU bugs than I do about their stock price or reduced dividends.

Alupis4• 2 years ago

Intel is a tarnished brand, sullied by unfixable bugs, suicidal chips, security holes, poorly executed "next gen" ideas, and worse. The only thing they're capable of these days, seemingly, is re-releasing slightly optimized, nearly two decade-old architecture... The people who actually choose their CPU (gamers for the most part) have abandoned Intel in droves. Intel is floundering at an epic scale, and showing no end in sight.

Can their long term investments bear fruit? One might hope... but continuing to flail helplessly in the face of the first actual competition in decades may not allow them to harvest that crop effectively.

The near two-decade vacation Intel took from actually being good is insane in hindsight. They thought their competition was dead (due to Intel's own illegal behavior), so they just kept copy/pasting the same garbage over and over, shoveling it to the population with ever increasing price tags (anyone remember the days of $5,000-$10,000+ "gaming" CPU's?).

If any company deserves to fail, it is Intel. Their story is simultaneously hilarious and sad.

gloryjulio• 2 years ago

AMD almost went bankrupt until xbox and ps apus saved them. Intel just need a chance to reform

b112• 2 years ago

I worry about selling off large chunks of their business for short term stock gains, and halting modernization and new fab builds. It's just weird. Upper management is panicking, totally the wrong message to send.

refulgentis• 2 years ago

I felt this was strongly, and felt incredibly sure of that, until I read Stratechery on it last week: https://stratechery.com/2024/intel-honesty/

It slipped by me how much AMD eating a little more every quarter really added up over the last ~5 years. (~9% to ~50% of datacenter revenue)

Also, the foundry stuff just isn't working as a financial exercise: they can't split it out as a division and massively subsidize it and seem responsible. And there's ~0 light on the horizon. No one wants to use it, even Intel is falling back to using TSMC's leading nodes now, which is letting it tread water against ARM in laptops.

If their confusing plan to do 5 nodes in 2 years or whatever works out, that'd enable them to start reversing the tide: they'd still have to build the same muscles TSMC has from always being a foundry, like having generic designs that are already in the market available, and convince people to switch suppliers, which is always risky, and usually done over years.

chx• 2 years ago

I really do not know, there's reporting of Broadcom working with Intel to eventually produce on 18A this of course was spinned as if Broadcom was disappointed 18A is not yet production ready because clicks are a must. It wasn't supposed to kick into high volume until 2025. https://www.reuters.com/technology/intel-manufacturing-busin...

The tests conducted by Broadcom involved sending silicon wafers - the foot-wide discs on which chips are printed - through Intel's most advanced manufacturing process known as 18A, the sources said. Broadcom received the wafers back from Intel last month. After its engineers and executives studied the results, the company concluded the manufacturing process is not yet viable to move to high-volume production.

and

A Broadcom spokesperson said the company is "evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation."

The make or break is not this summer. It's next. Gelsinger himself said he bet the company on 18A. If it doesn't work out then yeah, Intel is in very deep trouble but until then, Intel still has 29B cash on hand which is not chump change.

It's not that I stan for Intel, the heck do I care, I dislike the reporting that goes around this topic.

crop_rotation5• 2 years ago

But the article mentions that capital spending is down. Their revenue is also not really growing to support even bigger investments. Government subsidy will only take them so far. And they have stronger competitors in almost every domain they compete in.

elric2• 2 years ago

Sure, but the new fabs take time to build and spin up. I don't know how exactly they spend that money, but I'm guessing a large amount is up front (acquiring land and starting construction etc), so it doesn't seem impossible that spending slows down once construction is well under way?

ThinkBeat• 2 years ago

Most of the money Intel is investing now is thanks to giant state sponsorship.

tgsovlerkhgsel4• 2 years ago

They are investing an awful lot of money,

That was my impression, until the news came out that they had a massive round of layoffs. That looks like the opposite of investing, poisons the climate, causes people who can to seek greener pastures (potentially further disrupting those projects they allegedly invest into), ...

I'm sure there were other bad news that caused their stock drop from $30 to $20, and it's hard to separate the impact of the layoff from those, but I wouldn't be surprised if the layoff news (that generally tend to push stock values up for companies in a different situation) contributed to it (due to lowering confidence that the investments will happen and work out).

ac295• 2 years ago

The investments OP is referring to are almost certainly the CapEx investments related to opening new fabs and the aggressive push to launch new leading edge nodes.

Yes, layoffs suck, but Intel seems to be in a position where something had to give, and giving up on building a leading edge fab would almost certainly lead to a death spiral. Additionally, Intel was and still is a huge company. They have more employees than TSMC & AMD combined (an imperfect comparison, but probably as close as one can get).

mjfl• 2 years ago

Good thing they are the spearhead of our current industrial policy. Like switching to an all-sugar diet to cure cancer.

jmclnx• 2 years ago

Is this this article really stating "Wall Street is upset at Intel because they are not Nvidia" ?

If I had to guess, I think the above is true. Well too bad Wall Street :)

If Intel is really in bad shape, then maybe it is time for some form of nationalization.

GianFabien4• 2 years ago

"...shrivelled to $84bn, less than the value of its plants and equipment..." Hints at private equity sharks might start circling. Splitting chip design and fabrication would align with how most of the industry operates. Get very good at chip design or fabrication.

The era of WinTel is over. Megalithic data centers tend not to use MS OS and thus are free to choose AMD and increasingly ARM CPUs. For Intel to rush into AI would be, too little, too late.

Dwedit• 2 years ago

I blame Microsoft for enshittifying Windows 11 to the point of nobody wanting to "upgrade" to it.

soniman3• 2 years ago

If Intel is critical to the US industrial base, why aren't Nvidia and Apple stepping up to support Intel? What is the point of $3T national champions like Apple and Nvidia if they ship the industrial base overseas.

grecy2• 2 years ago

why aren't Nvidia and Apple stepping up to support Intel?

Is it the role of a for-profit public company to "support" another for-profit public company?

Free market, supply and demand, live by the sword die by the sword and all that.

If Intel made decisions that lead to it's downfall, surely that is on them.

darby_nine2• 2 years ago

Is it the role of a for-profit public company to "support" another for-profit public company?

It is (or it can be) if you want to avoid antitrust lawsuits. Same reason Microsoft bailed out Apple in the 90s.

ProfessorLayton• 2 years ago

TFA says companies have an incentive for intel to succeed so they're not all reliant on TSMC.

Apple used to dual-source their chips from Samsung/TSMC before they went all in with TSMC, but it's clear they're now vulnerable to geopolitical tensions.

tasty_freeze• 2 years ago

Intel and Nvidia are competitors. Intel makes CPUs and is trying to grow its GPU strengths. Nvidia makes GPUs and is trying to grow its CPU base.

soniman3• 2 years ago

Microsoft bought shares of Apple when it was on its knees. The foundry business doesn't compete with Nvidia.

moneydang3• 2 years ago

Intel does so much more than CPUs, relatively speaking Nvidia is a one-trick pony.

JonChesterfield6• 2 years ago

Global foundries looks boring but competent. Seems a better bet to me.

KK7NIL5• 2 years ago

GF sold its EUV machine several years ago when it decided to stop trying to compete at the leading edge of logic processes. So, they're not comparable to what TSMC, Intel and Samsung are doing.

jkic47• 2 years ago

the goal of the Nvidia, etc., is to maximize ther profits, not to subsidize the incompetence of their competitors.

loloquwowndueo• 2 years ago

There’s something of a case for Nvidia to buy or merge with Intel before AMD does …

mensetmanusman3• 2 years ago

Apple is its own nation state. Why would they show any support for the US industrial base?

They support lowest cost manufacturing in China even when those suppliers have been proven to have stolen the tech (free R&D!) with state support.

mlsu3• 2 years ago

That would be an argument for splitting Intel into two, the contract fab business and the design business. It's tough to make a partnership with Intel to fab your chip design if their other arm is competing with you on the same thing. Intel's process is tailored to their own designs which make it hard for outsiders to optimize. So, it's not only risky from a business perspective to make Intel your manufacturing partner, it's also more difficult than the alternatives.

Imho it's pretty likely that this will happen. Intel's IP will be sold off, while their manufacturing business remain, both due to the geopolitical situation and because although they have seen setbacks in recent years, they are still damn good at making chips.

osnium1233• 2 years ago

But their struggles on 10nm and the fact that Lunar Lake is on TSMC tells me that they are not good at making chips.

jltsiren• 2 years ago

Nvidia and Apple are international megacorporations, not national champions. Companies that do business and have shareholders all around the world tend to detach themselves from national concerns, as those are not in their interests. And they always keep the option to move their headquarters open, in case something goes wrong in their home country.

This effect is more obvious in small countries, but large ones are not immune to it either, especially if their fortunes turn.

osnium1233• 2 years ago

Apple and Nvidia are where they are today in part because of their use of the best fabs. If you force them to use Intel, their edge will erode and they will no longer be $3T national champions.

andrewstuart• 2 years ago

Intel has to become a major players in GPUs.

If it gives up on GPUs then its finished.

dingi• 2 years ago

No one in their right mind would think this is going to be a smooth ride. The massive amount of capital required to build cutting-edge fabs is a hard pill to swallow. These news writers need to cut Intel some slack. The world needs cutting-edge fabs in geopolitically stable locations. I believe Intel is simply too critical to fail at this point, and, as always, Uncle Sam won't let them.

darby_nine2• 2 years ago

Is intel even in a position to be competitive on the fab level? I was under the impression intel's fabs haven't been "cutting edge" for a long time now.

mlsu3• 2 years ago

Of course they are competitive. Look at benchmarks for AMD on TSMC and Intel. They are pretty close, close enough to be worth consideration both for consumer and b2b even today in 2024.

Just because they are second place, doesn't mean they have lost the race.

You really have 3 cutting edge players in fabrication. TSMC who is the best by a significant margin, and Intel/Samsung. TSMC is certainly winning right now, but they have not "won."

If Intel doesn't choke on its debt payments or corporate culture in the next 3-5 years, they will have one shot at pulling the nose up out of their dive. Of course their altitude is low enough that if they fail to execute in even a small way they will hit the ground.

ac295• 2 years ago

Intel is behind TSMC by maybe a year or two at most. Both TSMC and Intel are shipping products fabricated on 3nm-class fabrication today, but according to Intel's own slides they while they are roughly competitive on performance/watt, they are still behind on density and cost.

JonChesterfield6• 2 years ago

Intel has expertise and talented engineers.

Intel certainly had those things. It has lots of interesting IP around processor design and tooling locked away in source control and so forth.

I think it is critically important whether Intel has retained the engineers who knew how to build world class products. Nehalem was excellent and shipped in 2008 so I'm sure they had the skills back then. They used to have a reputation for paying well.

It seems plausible that Intel is a bureaucratic horror show that no longer pays competitively, in which case it would be difficult to see why the engineers would still be there. Especially with redundancy offers waved around roughly annually.

I reckon they're dead.

GianFabien4• 2 years ago

It is the same old story. Once the bean counters take charge, pandering to Wall St becomes the one and only priority. Engineering is deemed an expense and thus has to be cut and cut. The old experienced engineers retire and the new generation of engineers gravitate to companies with more favorable culture.

McDonnell Douglas takeover Boeing is an example.

cokeandpepsi• 2 years ago

Pandering to the people who own the company seems normal

jacooper• 2 years ago

If their latest cpus that beat apples m in battery life while still using X86 are anything to go by, these people seem to still be there.

2OEH8eoCRo0• 2 years ago

Intel is utterly massive and owns their own fabs. Companies that large don't collapse in a day unless there is some illegal shenanigans going on.

jsheard• 2 years ago

Demand for x86 processors isn't going away any time soon either, and they're only one of only two companies with a license to make them. AMD is currently strong on the x86 front, but their production is constrained by the wafer allocations they can get at TSMC while those wafers would be more profitably spent on making GPUs instead.

kanbankaren• 2 years ago

Is there any industry where x86 is absolutely necessary? Assuming ARM or other architectures could achieve same performance/$ or watt?

crop_rotation5• 2 years ago

General Motors and General Electric are two large companies that slowly became much much less relevant. Intel's collapse if it comes will also have been a decade+ in the making.

fefe23• 2 years ago

After two sets of disastrous quarterly earnings the company’s market value has shrivelled to $84bn, less than the value of its plants and equipment, from over $210bn in January.

Holy smokes. I just looked at the INTC 5 year chart and it is, in fact, a bath of blood. I don't think it happens very often that the market cap of a company is less than the worth of its physical assets.

moneydang3• 2 years ago

INTC is criminally oversold right now. I'm buying as much of it as I can at these prices.

coolbreezetft24• 2 years ago

I was contemplating the same thing. I get Intel isn't doing so well but I really can't imagine it just collapsing and dying. That said another possibility is just years of stagnation and low returns on your investment

bgnn3• 2 years ago

I don't invest in stocks so this might be a stupid question: I get that Intel is undervalued now. If things go right it should have a significant premium over its current value. But doesn't that also depend on the rest of the semiconductor sector? Let's say the AI boom bursts. Wouldn't this be a big hit for Intel due to slowdown of semi market, although they are doing good?

wiredfool• 2 years ago

There was a time when Apple had a market cap approximately equal to its book value, about 4 billion.

This was when basically every article about the company used the word beleaguered, they couldn’t actually ship the computers people wanted to buy, and they were flailing around with their next gen os.

JonChesterfield6• 2 years ago

It's hard to value said assets. You'd need a buyer for the fabs to run them as a going concern for them to be worth more than the scrap value and it's not obvious who that buyer might be. Piles of stock noone wants to buy probably aren't assets either, and the expensive office space might not be either.

lbcadden3• 2 years ago

Being worth less than your assets and liabilities is an extremely dangerous position to be in. The only reason they haven’t been bought and stripped for parts is the fact that the government probably would block it.

shrubble• 2 years ago

Lunar Lake, N100/N97, plus datacenter sales still must add up to some amount of sales?

Narishma• 2 years ago

N100/N97

Aren't those extremely cheap? Do they have good margins on them?

taspeotis• 2 years ago

N100 has a recommended tray price of $55

I feel like if they sold a million of them $55MM in revenue isn’t moving the needle much at all, even with a 100% profit margin.

JonChesterfield6• 2 years ago

Revenue is still pretty impressive. Profit margin not going so well.

cue_the_strings• 2 years ago

Of all the tech companies in the US, Intel is the most likely to be bailed out by the government, no questions asked.

Poor business? Gimme a break. They could exterminate a smaller ~~African~~ scratch that, Central or South American country with zero consequences.

Joking aside, I can see the US engaging in heavy-handed protectionism to help Intel.

jimbob45• 2 years ago

Joking aside, I can see the US engaging in heavy-handed protectionism to help Intel.

Yes, you can[0].

https://en.wikipedia.org/wiki/CHIPS_and_Science_Act

TuringNYC• 2 years ago

> Joking aside, I can see the US engaging in heavy-handed protectionism to help Intel.

Also, you can see it when we punish other businesses who had better strategy

https://www.wsj.com/tech/ai/nvidia-justice-department-probe-...

antisthenes• 2 years ago

As always, The Economist is 2-3 months behind the hurrent hate trend.

Yes, Intel is currently in a slump. Just like AMD was for a decade before Zen 2/3.

peppertree• 2 years ago

US government is going to keep bailing Intel out until it has a competitive fab. Intel is going to be the new Boeing/GM.

crop_rotation5• 2 years ago

Sure Intel might become like GM but that's not good news for the stock holders I guess.

nabla92• 2 years ago

I think Gelsingers plan is sound, but they have only one try left after they desired to skip 20A to save money. It's 18A or bust. If 18A is not success, Intel will drop out of manufacturing. If 18A does well, Intel is back making money next to TSMC.

So far 18A seems to be a success. Already sub-0.40 D0 defect density and launch at some time 2025Q3 and fully ramped up in 2026.

Fabs will bleed money 2024 and 2025, there is no way around it.

KK7NIL5• 2 years ago

20A was just a stepping stone to 18A, dropping it was more of a tactical than a strategic decision, I think people are reading too much into it.

bgnn3• 2 years ago

This is kind of normal in the industry too. Some nodes are skipped by the fabs, some are skipped by the customers even (TSMC 20nm, 7nm etc). If there's not much customer traction why bother.

nabla92• 2 years ago

They skip the node means no customer demand an no incoming money. If 18A is merely meh, they run out of money, and 14A never happens. Someone else buys the assets and Intel will not compete with Samsung or TSMC.

m3kw9• 2 years ago

A lot of companies is in life support, but Intel isn't one of them. They can sell some of their businesses if they really needed cash to service debt.

mensetmanusman3• 2 years ago

What can save it is a potential pointless war by China to destroy Taiwan.

deisteve2• 2 years ago

Call me conspiratorial but feels like TSMC is the target for both China and US.

China needs TSMC to have economic and political leverage. US wants TSMC to become an American owned enterprise so it can prop up Intel.

South Korea or Samsung rather see TSMC burn to the ground giving it monopoly marketshare. It benefits if US and China destroys each other in the process.

There's like only 3 guys in town with TSMC dominating the market and it just happens to be in a very risky region.

Just like the pipelines that were blown up by Ukranians I can't help but feel we will be seeing similar sabotage to TSMC should a war occur.

mensetmanusman3• 2 years ago

TSMC is geographically perfectly suited to be the best semiconductor manufacturing center in the world.

This is great for the free market, tsmc engineers make less than half what US software folks make.

This is a win/win for the US if TSMC keeps puttering along as normal.

segasaturn• 2 years ago

The people still invested in Intel are mostly in it for this reason. It feels like a doomsday cult to me, their best chance of getting the return on investment they want is an apocalyptic war between nuclear-armed superpowers.

api• 2 years ago

Split the fab business off and allow them to fab for anyone, for starters.

Animats• 2 years ago

"After two sets of disastrous quarterly earnings the company’s market value has shriveled to $84bn, less than the value of its plants and equipment, from over $210bn in January."

That's scary.

Fabs are so insanely expensive now. US$1 billion to US$4 billion each. Without the money to keep up, Intel becomes a niche player.

bsder• 2 years ago

I'd love to have Intel's cash flow while being on "life support", thanks.

This was like the stupid ass DEC hostile giveaway to Compaq while DEC had almost 2 gigabucks+ a year in enterprise services revenue that was going to continue forever. A single year of services revenue was almost as large as the entire merger deal.

And then, as PCs crashed and burned, Compaq couldn't figure out what to do with all that cash, either!

Executive morons all around.

GianFabien4• 2 years ago

So they bought HP.

ac295• 2 years ago

I'd love to have Intel's cash flow while being on "life support", thanks.

Intel lost money the past two quarters. Revenue is still high, but having high "cash flow" doesnt work indefinitely if more of it flows out the door than in.

summerlight• 2 years ago

I think it will all up to whether Intel can regain its technological edges. For years, Intel did produced worse chips in terms of power efficiency (vs ARM) and performance (vs AMD) but now it looks like the chip design has caught up given that Intel on TSMC now shows comparable power efficiency to ARM. I think the playground is now leveled in terms of chip design.

The real problem is the manufacturing process. This used to be the power house for Intel. They kept it 5 years ahead of their competitors before the Krzanich era. But in all the geopolitical and infrastructural contexts, is it even feasible to restore that in America? It is not very clear. Intel needs to build up all the ecosystems for semiconductor manufacturing but America is far, far behind of Taiwan (and eastern Asia in general).

lispisok• 2 years ago

Where does Intel go from here?

* They missed out the rise of mobile

* They missed out on the rise of GPU computing

* AMD has been making gains in the server cpu market

What do they have left other than consumer computer market where their main advantage is name recognition?

tgsovlerkhgsel4• 2 years ago

Fabs. They're one of the few companies that actually owns/builds state-of-the-art fabs, in a critical field where the main competitor is at risk of having its main production sites destroyed in a war everyone is expecting to happen.

Joel_Mckay• 2 years ago

They have so much inertia in the market, even if they stuck with i7 it would remain relevant for the next 2 decades.

Keen to see what the team that split off to do a RISC-V DSP chip end up producing. Even if they added dual RX/TX SDR front ends on a SoC, than it could open up a single-chip smartphone solution etc.

Intel is entrenched with process-people obsessed with features no market asked for like hardware RATs, and betting on imaginary AI economies.

There are paths to move forwards technologically, but Intel as a company has structured itself to be its own worst problem. =3

bane• 2 years ago

I'm going to call it, and write it here so that I can link back to this comment in a few years to see how right or wrong I was.

Prediction: Intel is done. It will become a zombie company like IBM or Oracle in a few years, without the license lock-in moat keeping those rotting corpses alive, but may be able to offer cheaper fab services for "it just was the state of the art" chip manufacturing market. They'll continue to focus on becoming a financial optimization organization and never return to being a technical leader. They've become a company of pure inertia.

Reasons for the prediction:

1. Intel is not longer the process node leader and hasn't been for a while (when even was that? 14nm? 2014?).

2. Intel seems to be struggling to keep lead engineering talent, board members, and leaders of all kinds. Jim Kelly, Lip-Bu Tan, and so on. They still have Jeff Wilcox, but who knows for how long? At least the CEO is an engineer finally...I guess.

3. They continue to launch then retract in otherwise profitable markets, not taking any particular lead, but not continuing to invest until they get it. They still have really only one core business.

4. Their branding strategy seems to be built around confusing consumers in the hopes that they accidentally buy the wrong things. Successful companies can be clear in their product naming, zombie companies end up trying to stuff every single market niche with as much microtuned, barely differentiated, SKUs as possible. In actuality it's probably financial engineering to figure out what to do with various classes of yield issues. Disable the bad part of the chip, slap a K or KS, or KF, or T, or whatever on it and get it on the shelf. I counted over a dozen different Core i5 14 gen SKUs, and over 20! 13 gen Core i5 SKUs. There's probably 200 different brand-new-from-Intel CPU SKUs on the market today. Insane.

5. They're getting feature for feature beaten by smaller, lower stakes competitors both in and out of their ISA. Those same competitors are almost always cheaper, and made at other fabs. In otherwords, Intel doesn't lead anywhere and has no lock-in.

6. Their main moat, their ISA, can be comfortably virtualized or emulated elsewhere, bugs and all, at entirely useful speeds meaning there is a ready exit ramp as customers wish to take it.

There's probably more, and it's probably continues to paint a very poor picture, but there is very little reason today, or in the near future, to stay with Intel as a manufacturer except for inertia.

segmondy• 2 years ago

US Govt will save it. chips are as much needed as oil, steel and other raw materials that any well equipped nation needs, without it your military is toast. So IMO, USA will save Intel.

Intel is on life support. Can anything save it?

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