The End of an Era at Intel
- Paul Thurrott
- Jul 26, 2020
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36
Intel CEO Bob Swan admitted to the unthinkable this week, saying that his firm could outsource chip production to remain competitive with its smaller, more innovative rivals.
The admission came during Intel’s post-earnings conference call. Intel, which had just delayed the introduction of 10-nanometer (nm) chipsets for five years, had admitted earlier in the day that its next-generation 7-nm designs were also behind schedule and would face at least another year of delays. Meanwhile, Intel’s competitors are already shipping more efficient designs. AMD moved to 7-nm chips this year, and Qualcomm has moved to even smaller 5-nm designs.
“We have invested in contingency plans to hedge against further schedule uncertainty,” Mr. Swan said in response to a question about Intel’s inability to ship 7-nm chips on time and whether the firm would consider outsourcing. “The extent that we need to use somebody else’s process technology and we call those contingency plans, we will be prepared to do that. And if we do, there’s lots of moving parts.”
Even the admission that Intel is prepared to outsource chip production is a massive hit to the reputation of a firm that ostensibly led this market for over 30 years. Like Microsoft in software, Intel was the hardware that drove the PC revolution, and its chips are still popular in PCs and datacenters today. But these markets are moving, inexorably, to more power efficient designs like those from ARM and its licensees. And that could leave Intel out in the cold.
Quoted in Bloomberg, analyst Chris Caso described the admission as “a stunning failure [that] could well represent the end of Intel’s computing dominance.”
“With the latest push out of process technology, we believe that Intel has zero-to-no chance of catching or surpassing TSMC at least for the next half decade, if not ever,” analyst Chris Rolland added, referring to a Taiwanese manufacturing facility. TSMC already produces more than one billion chipsets each year, far more than Intel.
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Conversation 36 comments
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Chris_Kez
Premium MemberLog in to Reply<p>Oof</p>
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JH_Radio
Premium MemberLog in to Reply<p>So right now Intel makes all the chips in house? So say when the 7NM does ship, they could use somebody like Foxcon to make the chips? </p>
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Paul Thurrott
Premium MemberLog in to ReplyYes, but like TSMC, not Foxconn.
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IanYates82
Premium MemberLog in to Reply<blockquote><em><a href="#556909">In reply to JH_Radio:</a></em></blockquote><p>As hard as it is to make iPhones or Surfaces from components, making a chip is exponetionally harder. Big chip fabs to be made, etc. More like TSMC is the supplier you go to for this work. </p><p><br></p><p>Does Samsung do the fab for its Exynos chips? I think they do</p>
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madthinus
Premium MemberLog in to Reply<blockquote><em><a href="#556994">In reply to IanYates82:</a></em></blockquote><p>Samsung offer the same services as TSMC. Their process is similar because they jointly developed it with TSMC. This is still based of the work of IBM. There is still differances between them. And as we evolve away 7nm the process diverge again. </p>
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RobertJasiek
Log in to Reply<p>Roughly how much would Intel pay TSMC per CPU?</p>
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Truffles
Log in to Reply<blockquote><em><a href="#556932">In reply to RobertJasiek:</a></em></blockquote><p>I'm guessing that if TSMC does decide to make chips for Intel it'll be at an eye-watering price per wafer to offset the risk of upsetting it's highly profitable and multi-decade relationship with Apple. Intel will certainly be wholesaling the chips at loss for the next few years.</p>
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RobertJasiek
Log in to Reply<blockquote><em><a href="#557018">In reply to Truffles:</a></em></blockquote><p>If TSMC can produce the chips, it will. Intel would be a reasonably big customer so TSMC would want to earn the money. There have also been TSMC CPUs at reasonable endconsumer prices, such as €40, so I do not expect Intel having to pay more than €40 per CPU. Since Intel sells CPUs for ca. €35 to €1000 (endconsumer prices), it would, if TSMC fees are high, continue to manufacture the low-end CPUs, let TSMC produce the mid to high-end CPUs and sell them for at most €40 more per CPU to endconsumers than now. This would be the worst case. Basically, I am wondering whether Intel only has to pay €5, €10 or €20 to TSMC. Whichever, Intel has to pay more than if it could continue manufacturing its own CPUs.</p><p>That TSMC can produce nice chips it has proven with AMD's and Apple's CPUs. Of course, it will be interesting to see whether Intel's chip design fits well to TSMC's recent production processes. I think that the endconsumer will profit from better CPUs, even if he should have to pay €40 more. OTOH, so far Intel's mid to high-end CPUs have been expensive. With AMDs competition, Intel might also choose to incur a decrement of income to stay in the market.</p>
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alsorun
Log in to Reply<p>Just watched intel CEO Bob Swan on TV interview. He looks like a passionless guy with <span style="color: rgb(17, 17, 17);">mediocre intelligence. No wonder Intel is in trouble. Think of a company full of people like him. </span> </p>
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SRLRacing
Log in to Reply<blockquote><em><a href="#556933">In reply to shameermulji:</a></em></blockquote><p>While they both have chip fabs I would not really call them competitors. Intel only manufactures its own chips while TSMC only manufactures other companies' chips. So the relationship would be more akin to Apple using TSMC to manufacture their A series processors. </p>
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cavalier_eternal
Log in to Reply<blockquote><em><a href="#556933">In reply to shameermulji:</a></em></blockquote><p>Part of TSCM’s model is making chips designed by other companies. They make chips designed by Apple and AMD so I don’t see why they wouldn’t make chips designed by intel. If intel is going to outsource production it makes more sense to profit off it than to have a competitor like Samsung get the business. </p>
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proftheory
Premium MemberLog in to Reply<blockquote><em><a href="#556947">In reply to cavalier_eternal:</a></em></blockquote><p>It's not an issue that TSMC can but rather that Intel can't.</p>
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cavalier_eternal
Log in to Reply<blockquote><em><a href="#556955">In reply to proftheory:</a></em></blockquote><p>what does that have to do with the question about TSMC taking intel’s business? ?♂️ </p>
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solomonrex
Log in to Reply<blockquote><a href="#556947"><em>In reply to cavalier_eternal:</em></a></blockquote><p>That is a complete 180 to Intel's business model, involved a lot of disruption, thousands of jobs lost, the loss of some of the few fabs that are based outside of China, etc. It's not that they can't make money that way, but it will be a lot less money and very little margin for error.</p>
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cavalier_eternal
Log in to Reply<blockquote><em><a href="#557068">In reply to solomonrex:</a></em></blockquote><p>What does that to do with if TSMC would take Intel's business or not?</p>
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michael_babiuk
Log in to Reply<p>"The End of an Era at Intel" … I have one question for you, Paul. Noting that Intel's current CEO is Bob Swan, did it ever occur to you that an alternate article heading might have been "Is this Intel's Swan Song"? Being familiar with your Tweet style, you have my permission to use it on Twitter in referencing your article. BTW, well written. </p>
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pierrelatour
Log in to Reply<p><span style="background-color: rgb(242, 243, 245); color: rgb(28, 30, 33);">Oh, how the mighty have fallen and without the need of some meddling from an over reaching government agency trying too stay relevant with the ever so popular "abusing monopoly" b.s. too…</span></p>
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solomonrex
Log in to Reply<blockquote><em><a href="#556953">In reply to pierrelatour:</a></em></blockquote><p>America is going to lose its last chip making facilities because Intel had no competition, ignored new markets and got lazy and overcharged for nearly a decade. Yay?</p>
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pierrelatour
Log in to Reply<blockquote><em><a href="#557066">In reply to solomonrex:</a></em></blockquote><p>Like i said , they done it on themself, without the help of some over reaching governement agency trying to stay relevant with the ever so popular "abusing monopoly" b.s.</p>
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johnh3
Log in to Reply<p>So even AMD is ahead of Intel now? Who could belive that for some years ago. The future for Intel not looks good.</p>
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proftheory
Premium MemberLog in to Reply<blockquote><em><a href="#556933">In reply to shameermulji:</a></em></blockquote><p>That's like asking would Samsung accept business from a competitor.</p>
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solomonrex
Log in to Reply<blockquote><em><a href="#556956">In reply to proftheory:</a></em></blockquote><p>Which they do? They've made Apple chips from time to time, and Apple being extremely secretive and competent, that didn't seem to help the Exynos team one bit. Which is kind of amazing, actually. You'd think at least a little performance would rub off just from proximity and gossip. The world is a big, weird place.</p>
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djncanada
Premium MemberLog in to Reply<p>If TSMC becomes the outsourced partner, would that concentrate chip manufacturing with TSMC?</p>
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madthinus
Premium MemberLog in to Reply<blockquote><em><a href="#556978">In reply to djncanada:</a></em></blockquote><p>Yes, it would. TSMC has a shacky history of ramping new tech too. They have been on a bit of a run, but as we shrink nodes, things gets complicated. Per Intel they can match the density of TSMC 7nm process with 10nm+. There is a lot more to it than just the lithography. </p>
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brettscoast
Premium MemberLog in to Reply<p>Intel have dropped the ball big time which is amazing considering the resources & money they have had at their disposal. AMD, Qualcomm have sailed passed them effortlessly it seems in their development & production of quality chips. By the time they get a 7nm chip out the door the ship has well and truly sailed.</p>
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mattbg
Premium MemberLog in to Reply<blockquote><em><a href="#557009">In reply to brettscoast:</a></em></blockquote><p>You're right, but AMD doesn't manufacture their own chips – they outsource just like Intel is entertaining the idea of doing.</p><p><br></p><p>Most people don't care if a chip is 14nm, 10nm, or 7nm. They care if it performs well in a small package and gives them the battery life they need. So, that part isn't important in itself.</p><p><br></p><p>But it's very concerning that Intel can't meet their targets because they need to keep up continuous improvement/innovation and who knows how straightforward it is to migrate a processor design to someone else's fabrication equipment, and at the volumes they require.</p>
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nine54
Premium MemberLog in to Reply<blockquote><em><a href="#557072">In reply to mattbg:</a></em></blockquote><p><br></p><p>Regardless of missed opportunities around mobile and ARM, the inability to deliver against shipping targets suggest a more structural or cultural challenge. Apparently others agree given news of organizational changes within the engineering org.</p>
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vic116
Log in to Reply<blockquote><em><a href="#556933">In reply to shameermulji:</a></em></blockquote><p>Why not? Isn't TSMC in business to make money?</p>
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JH_Radio
Premium MemberLog in to Reply<p>Oh I see. Foxcon doesn't make chips, that's why it wouldn't be them. </p><p><br></p>
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cavalier_eternal
Log in to Reply<blockquote><em><a href="#557006">In reply to shameermulji:</a></em></blockquote><p>An intel doesn’t make chips for fabless designers. So, they aren’t really in direct competition. </p>
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blue77star
Log in to Reply<p>It is not that all bad. Intel is a chip designer and maker, AMD is not. Intel 10nm++ has higher density than TSMC 7nm+, in other words better. 10nm++ desktop part will be out sometimes next year, first half and as far as 7nm goes that would be equal to TSMC 5nm++. I don't think Intel will outsource chip production but move some of 14nm fabrication to Samsung and potentially others so they can keep up with the demand.</p><p><br></p><p>Speaking of Apple, Nvidia is about to buy ARM and have full control over it…we will see how that pans out. Nvidia does not like anyone but themselves, and they can easily poop on Apple.</p>
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genecrispr
Premium MemberLog in to Reply<blockquote><em><a href="#557067">In reply to blue77star:</a></em></blockquote><p>I totally apologize, this is the second time I am hearing this. Is there an explainer or ELI5 to help me understand why Intel 10nm = other 7nm? Cause I have to admit, i've been Assuming a nm was a nm. I'm willing to admit i'm wrong, but need some help.</p>
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RobertJasiek
Log in to Reply<blockquote><em><a href="#557117">In reply to GeneCrispr:</a></em></blockquote><p>In ISO and science, a nm is a nm. In CPU marketing, not so. I cannot provide an URL ad hoc but Intel 10nm = other 7nm because different structures are measured. 3D adds more fun.</p>
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dmitryko
Log in to Reply<blockquote><em><a href="#557129">In reply to RobertJasiek:</a></em></blockquote><p>Intel 10 nm process node has the same transistor density as 7 nm nodes from Samsung and TSMC (while GlobalFoundries <a href="https://en.wikichip.org/w/images/thumb/5/5c/7nm_densities.svg/496px-7nm_densities.svg.png" target="_blank">cancelled their 7 nm node</a> back in 2018). </p><p><br></p><p>Intel 7 nm node should more than double on that, with ~1.3x more density than 5 nm TSMC node.</p><p><a href="https://en.wikichip.org/wiki/File:7nm_densities.svg" target="_blank"><img src="https://en.wikichip.org/w/images/thumb/5/5c/7nm_densities.svg/496px-7nm_densities.svg.png"></a></p><p><a href="https://en.wikichip.org/wiki/7_nm_lithography_process" target="_blank">https://en.wikichip.org/wiki/7_nm_lithography_process</a></p><p><br></p><p><a href="https://en.wikichip.org/wiki/File:5nm_densities.svg" target="_blank"><img src="https://en.wikichip.org/w/images/thumb/e/eb/5nm_densities.svg/490px-5nm_densities.svg.png"></a></p><p><a href="https://en.wikichip.org/wiki/5_nm_lithography_process" target="_blank">https://en.wikichip.org/wiki/5_nm_lithography_process</a></p>
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solomonrex
Log in to Reply<blockquote><em><a href="#557067">In reply to blue77star:</a></em></blockquote><p>That is ridiculous. The 14nm fabs at Intel are all established and paid off. This is the opposite of what they will do. They're talking about outsourcing because they're going to do it and they're going to take a huge hit, so they'd rather take the hit now and not when they finally sell 7nm chips. And because they need to completely remake the company, on short notice. </p><p><br></p><p>Demand is going to flag as Intel falls farther behind, as well. People in the gaming community knew this was happening, but to the corporate world, this is a stunning admission and plans are being rewritten right now.</p><p><br></p><p>If Apple was going to be affected by an ARM purchase, they'd just purchase ARM. They have more money than God. Don't be silly. They were a founder of ARM and have a ton of IP built up, and they're now the top chip maker in the whole world. They'll be fine.</p>
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Thretosix
Log in to Reply<p>It seemed people counted AMD out back in the day. They'll be fine.</p>
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