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How difficult will the job of Intel’s new CEO be? The main rival of the company has just given important clues.
Pat Gelsinger doesn’t start the company until mid-February, but Intel’s fourth-quarter results Thursday afternoon will likely give a strong sign of at least its initial trajectory. Intel has vowed to take the opportunity to educate investors about its lingering manufacturing issues. The company also said it would state whether it intends to stick to its long-standing practice of being the sole maker of the chips it designs, or whether it will start outsourcing the production of some future designs, most likely at Taiwan Semiconductor Manufacturing, or TSMC.
Mr Gelsinger’s long tenure as an Intel engineer strongly suggests that the chipmaker is not yet ready to throw in the towel on manufacturing. But competing with an ascending TSMC will be a difficult task. TSMC reported Thursday that revenue for 2020 jumped 31% – its best growth in more than a decade – to a record high of $ 45.5 billion. And demand is so strong for the company’s manufacturing services that TSMC also plans to spend a record amount of capital spending for the coming year to increase capacity. The chipmaker plans to spend between $ 25 billion and $ 28 billion for 2021, double the annual capex bill Intel has on average over the past five years.
Intel is still a much larger company, with 2020 revenue forecast to be around $ 75.3 billion, a 5% increase from the previous year. But the recent increase in booming computer sales and data center demand won’t solve the company’s manufacturing problems. Wall Street currently expects Intel revenue this year to fall 7%, which would be the company’s worst decline in more than a decade. TSMC is expected to increase revenue by 20% to around $ 54.4 billion by 2021, according to FactSet.
Intel says it has made great strides in its 7-nanometer manufacturing process, which has been the source of recent problems. But TSMC now manufactures more advanced chips in bulk at 5 nanometers. The company is already developing its 3-nanometer process, which it says would produce chips in volume on Thursday by the second half of 2022. That means that even if Mr. Gelsinger succeeds in putting Intel’s manufacturing process back on the rails, the company will. still be very late. Bernstein’s Stacy Rasgon says Intel’s disadvantage vis-à-vis TSMC is “probably set in stone” for at least the next three years.
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