What is Intel’s fate? Curiously, this is not a question that has much grey area in the public arena, even though it should. Commentary, at least the discord I monitor and read, seems to either think Intel is on the right track or a dead company walking. Investors on the sell-side I chat with agree that Intel’s product story, the chip/architecture story, and the manufacturing story are sound. However, Intel’s PE correctly tells the investor narrative that profits to be gained from Intel products and Intel manufacturing services are not in the foreseeable future and, therefore, not priced into the stock price. Intel has a lot of work ahead, and I want to outline my current thinking around the company. I will start with the product story.
Intel is one of my Silicon Big 5 companies because they meet the criteria I set in my overview, that they own critical IP needed to create their own proprietary semiconductor architecture that is unique and exclusive to Intel. Any critical analysis of Intel and its products must also look at the nature of Intel architecture and how Intel silicon engineers design solutions at the silicon hardware and software layers that differentiate Intel’s products from competitors.
Throughout the years when Intel dominated the computing industry, its architecture was always a key part of its success. With Intel falling behind in process technology at their own foundries, it has been hard to truly analyze the quality of their architecture since it has been made on process technology that was not as cutting edge as competitors. I’ve always wondered what would happen if Intel started making their highest-end CPU cores on TSMC’s cutting-edge process. Would we see the superiority of Intel’s architecture outshine competitors or, at the very least, would Intel’s products be more competitive–specifically on performance per watt– to AMDs if both companies were on cutting-edge TSMC process technology? Interestingly, we may soon find out as Intel will make some products entirely using TSMC process. However, TSMC likely cannot currently support all of Intel’s chipmaking needs. While Intel is committed to having some of their CPU tiles built at TSMC, that will be with TSMC 3nm process and we still don’t know how many CPU tiles Intel will have built with TSMC.
While there is no or limited, capacity at TSMC with their 5nm and 4nm process, if Intel decided TSMCs foundries are more a strategic fit than their own, it is possible they could secure enough at 3nm with TSMC. But here is where the challenge with Intel and the United States CHIP Act may limit how much Intel could rely on TSMC even if they wanted to by adding legislation to disincentives US tech companies to use overseas technology.
Looking at Intel products for the next few years as it is related to Intel Architecture, there are some positive signs. Historically, even though Intel has been designing CPUs on two-three-year-old process technology, their performance has not been the lagging indicator. What has lagged the most competitively is performance per watt as Intel chips at full performance ran significantly hotter than competitors. As Intel begins architecting new products using chiplet architectures, it will be interesting to see how much ground they can gain back when it comes to performance-per-watt. With Intel moving to a chiplet architecture going forward, it should give us more insight into the state of Intel architecture and if this remains a key potential differentiator.
Historically, Intel architecture and Intel process technologies were one and the same when it came to Intel’s differentiators. Under the leadership of Pat Gelsinger, Intel has created Intel Foundry Services (IFS) with the goal of supplying manufacturing needs for semiconductor companies other than Intel. Some may remember Intel made somewhat of an attempt at being a foundry for others before, but it’s fair to criticize its previous attempt as one without a true commitment to the cause. This time certainly feels different and the environment for Intel to succeed as a foundry is quite different than at any time in history.
One could argue in an era of deep geopolitical conflicts, which could have drastic impacts on the tech industry’s global supply chain, it is more important than ever that Intel succeed with its foundry ambitions. This is a matter of national security for the United States. It is also a matter of strategic importance for US companies that may need to rely more on domestic silicon manufacturing as their global supply chains could become more challenging with increased political tensions. The bottom line is that every US technology company will benefit if Intel can compete with TSMC in process technology.
The US government is stepping in with the CHIPs Act to help Intel invest in leading-edge foundry efforts. The US government could instigate legislation that requires companies who want to sell technology products in the US to be required to use a percentage of their product’s technology to be made in the USA. Even if this happens, Intel needs companies to WANT to use their foundry services based on quality or superior technology, not be FORCED to use their foundry services. To that effect, I think Intel’s Foundry Service has two interesting potential differentiators.
Transistor Innovation. One of the things Intel has historically done very well is transistor innovation. And while it has been some time since they last innovated at the transistor level, they announced a new transistor design that will hit their roadmap in 2024/2025 called RibbonFET. This new transistor architecture combined with a new power delivery technique called PowerVia may turn out to be some of the most innovative work in process and package Intel has created in decades.
If Intel’s roadmap manufacturing timeline stays intact, it could be quite competitive with TSMC in 2025 with process technology. Even if Intel does not surpass TSMC to regain process leadership, something I don’t think is entirely necessary, the card up Intel’s sleeve that I think is most interesting is where their foundry is going around packaging technology.
In an era where Moore’s Law has slowed drastically, at least the traditional understanding of the law that cost per transistor decreases, packaging technologies are likely to become more important than process technology. This is an area I think Intel foundries may have the most differentiated advantage. And it comes because of the slow-down in Moore’s Law as the semiconductor industry moves to chiplet architectures.
Packaging Innovation. Intel, along with dozens of other companies, is a part of the UCIe. A consortium of all the main semiconductor companies and foundries to create a standard for chiplet interconnects. What makes this interesting is technology companies will be able to source different technologies from different companies and foundries to create proprietary silicon solutions. The tricky part to this will be how the different chiplets are connected together and manufactured, and this is where Intel Foundries may play their most important role.
By leading in package innovation and being the foundry of choice when it comes to packaging design and manufacturing, Intel Foundries could find value to the broader industry of customers whether or not they choose TSMC, Samsung, or Intel for chiplet designs. The packaging part of this equation is going to be extremely difficult and Intel appears to be the foundry most interested in solving this problem for the broader industry. Another key part of Intel’s value here is its ability to aid in the supply chain for manufacturing chiplets. Industries with very little semiconductor supply chain, like automotive, for example, will find great value in Intel being able to not just manufacture complex packaging solutions for them but also aid in managing the supply chain.
The success of innovation at Intel Foundry will greatly benefit the broader technology industry. Not only is it critical to have a leading edge foundry on US soil, but competition with TSMC and, to a degree, Samsung is healthy for all technology companies. But successful innovation at Intel Foundries will also help Intel with Intel architecture further compete as well. But it is important to separate the future of Intel architecture and Intel Foundries. Each can succeed on its own independence and, to a degree, should be accountable for the quality of the technology products each product and technology as well as the business/revenue growth of each independently.