Once you buy the company the NDA dissolves. I believe Intel is entering the foundry business mainly as an industrial intelligence operation.Īs a chip company exclusively manufacturing its own designs Intel competes with most of those fabless semiconductor companies, but as a foundry - especially the cheapest best foundry around - those same companies will open their kimonos to Intel (with strict NDAs in place first, of course).īut this time the NDA doesn’t matter in this case because Intel’s purpose isn’t to steal trade secrets - it is to find companies to buy. They’ll still be cheaper, just a little bit cheaper. If Intel drove the per-wafer price up to $12,000 or even $20,000 it wouldn’t make enough difference to Intel’s bottom line to be worth the anti-trust risk. But I don’t think that is what’s happening in this case. Traditionally this would lead to a market bloodbath with most Intel foundry competitors dying and production costs eventually going back up as companies fail and capacity is cut back. It is soon to have excess 22 nm and then 14 nm production capacity and will be able to easily undercut any other manufacturer at those feature sizes, all the while offering superior performance. He needs mojo right now.Īnd that’s why Intel is suddenly interested in the so-called foundry business. And even if it gets its product mojo back tonight that won’t have much effect on its business for another two to three years.īrian Krzanich can’t wait two to three years for new mojo. It can build the darned things better than anyone else but it doesn’t necessarily have the right product mix to build for the current market. That’s the whole idea behind vertical integration - to take all the profit from every stage of the business.Īdmittedly there’s plenty of R&D and other expenses that need to be covered by that $400,000 wafer, but the idea of making it all yourself to reap all the benefit makes sense… except if you don’t know what to make.
Typically a larger fabless semiconductor company will pay around $6,000 for each foundry-processed wafer, yet the same wafer filled with Ivy Bridge processors can easily generate $400,000+ in sales for Intel. What’s stupid about competing with TSMC and others in the foundry business is the profit margins aren’t good at all. But the more I think about it the more sense it actually makes. On the face of it this move looks really, really stupid.
So Krzanich has Intel looking into building chips for others, entering the foundry business.
Desktops are in decline, the market is all GPUs and mobile with a huge flash RAM opportunity on the horizon - all areas where Intel is at a disadvantage. What it doesn’t have, however, is the best mix of chips to build. Intel has the best technology, the best yields, and because of the way things work in the semiconductor industry, it has the lowest manufacturing cost per chip. Its only real competitor in manufacturing is TSMC in Taiwan and even that’s not a close race. Understand that Intel is far and away the best semiconductor manufacturer the world has ever known. So what’s a Krzanich to do? He’s making the best of a difficult situation. There are other players like Qualcomm in the mobile space and even Apple that are far scarier than AMD. Only today AMD isn’t that much of a threat.
#Oncue intel Pc#
Then PC sales were still growing and excess production capacity promised the sort of low prices that could finally kill the hated AMD. Increasing the fab capacity makes sense, too, though maybe not as much sense as it made a few years ago when the idea was first presented. This is not a criticism, Brian: I’d do the same thing. Watch for Intel to sell OnCue to Verizon for $500 million as planned, but with sweetheart financing from Intel Capital so it doesn’t cost Verizon a penny upfront. He clearly (and properly) killed OnCue, which was Intel’s third try at building a media empire and wasn’t any more thoughtfully done than the first two failures. That’s not to say Krzanich has been without impact on the company. So it’s not like new Intel CEO Brian Krzanich moved into his office and said, "Let’s build some new fabs". Second, it takes so long to plan and build these plants that this part of Intel’s strategic plan had to have been in the works for years before the company ever mentioned it in public. First, at $5+ billion per fab you don’t add 3-4 new ones without a darned good reason for doing so. This is fascinating news for several reasons.
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