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(Bloomberg) – Intel Corp. on Tuesday unveiled a grand plan to restore its past glory in chipmaking. To succeed, new CEO Pat Gelsinger must adopt a strategy former Intel never dreamed of: playing nicely with rivals.
“Intel is back. The old Intel is the new Intel, ”he said. “We’re going to be market leaders and we’re going to satisfy new foundry customers because the world needs more semiconductors and we’re going to fill that gap in powerful and meaningful ways.”
Intel shares jumped 7% on the plan. Yet the key elements of the strategy are new territory for a company that is used to doing everything its own way. Intel has almost always designed and produced its semiconductors in-house. Now Gelsinger is starting a foundry business that will make chips for other companies. And it also plans to use its competitor’s factories to outsource the production of more Intel components.
This will create new, complex relationships. For example, Taiwan Semiconductor Manufacturing Co. runs the world’s first chip foundry business. Intel is now encroaching on TSMC’s territory, while also expecting that rival to make some of Intel’s best chips.
“TSMC will do as much for Intel as they see fit,” said Matt Ramsay, analyst at Cowen & Co.
Read more: Intel’s $ 20 billion smelter plan hits TSMC, Samsung shares
Before other chipmakers commit to using Intel’s factories, it must resolve its own manufacturing issues, the analyst added. Intel’s latest 7-nanometer production process has been delayed and this follows several missed deadlines for the previous 10-nanometer standard. Gelsinger said on Tuesday those issues have been resolved, but analysts are dubious.
“We just don’t understand why customers would strongly support an Intel foundry given that Intel is so far behind in process technology and does not yet have the standard libraries needed to compete with TSMC,” said Chris Caso, analyst. at Raymond James.
Charles Shum, analyst at Bloomberg Intelligence, said large tech companies, such as Apple Inc. and Qualcomm Inc., would be reluctant to shift orders to Intel because they compete with the company in chip design.
TSMC Can Meet Intel’s Chip Manufacturing Challenge: React
Gelsinger began his career at Intel in the 1970s and rose through the ranks to lead some of its larger units. He left in 2009 as Intel neared its peak with a strategy it helped put in place. Intel has introduced new products and new manufacturing technology at a lightning pace that competitors could not match, and PC and server customers have built their product cycles around it. to build on his recent experience as head of software maker VMware Inc. to navigate a more complex world for Intel.
In a presentation with analysts on Tuesday, Gelsinger said the way semiconductors are designed and manufactured has changed. Parts of chips can now be made in different places using different technologies and then combined into packages. This helps designers choose what best suits their needs – and it makes the older Intel model of keeping everything under one roof less relevant.
Intel showed logos for Qualcomm and other companies it says support its foundry push. With geopolitical and trade tensions rising between China and the United States, customers want suppliers with facilities outside of Taiwan, Intel said.
Read more: The world is dangerously dependent on Taiwan for semiconductors
Gelsinger shakes him up further by doing something his predecessors would have considered sacrilege. Intel jealously guarded its X86 processor technology, the dominant instruction set for computer microprocessors. Now it will be available as a design if Intel Foundry customers want to use it. And they can combine this with rival approaches such as those offered by Arm Ltd. and an open source standard called RISC-V, he said. Intel has already tried and failed as a foundry. This effort is different because customers will have access to the best manufacturing technology from Intel, Gelsinger said. And there are at least two new factories being built for this effort. “Our past attempts were somewhat timid,” Gelsinger said. “Customers will benefit from the best we have to offer.”
New Intel CEO May Lead to Improved BPA, Assessment: Company Insight “If he’s really dedicated to the benefits he touts today, then that will put Intel on a much more competitive footing,” said Loop Capital Markets analyst Cody Acree said in an interview with Bloomberg Television. “You’re going to have this honeymoon period that Mr. Gelsinger is in today, where people are looking for change, looking for optimism, whatever to hang on with Intel. It is the right thing to do. But it’s also quite short. “
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