Reaction has been mixed to Intel’s announcement Tuesday to spend $20 billion for two chip fabs in Arizona and to create a separate unit called Intel Foundry Services to open manufacturing capacity to other chipmakers globally.
Several analysts praised recently installed CEO Pat Gelsinger for an energetic online presentation in which he said several times that “Intel is back” and willingly admitted previous problems with production of earlier CPU hardware.
However, some analysts were cautious about taking on chip foundries like TSMC and Samsung. A Bank of America analyst said in a comment that there is “no evidence” that Intel can match or exceed the capabilities of TSMC, now planning a chip plant in Arizona for 2024, similar to Intel’s timetable. 80% of chips are now manufactured in Asian countries.
B of A also noted that Intel is the only semi vendor that has issued guidance for sales and gross margin to be down for 2021 even with strong growth predicted in PCs and semiconductors.
Summarizing a number of analyst sentiments, Chief Analyst Bob O’Donnell at TECHnalysis Research praised Intel but also issued a warning: “Not only does the boldness and breadth of the strategy appear to be a much-needed shot in the arm for Intel, but the timing couldn’t be better.”
Later in his note, in Seeking Alpha, he added: “As bold and impressive as the new Intel strategy may be, it’s still critical to remember that the company needs to executive on that vision and regain some of the prestige and trust that it’s lost over the last few years. Catching up on process technology, in particular, is an extremely challenging task.”
The process technology change is called IDM 2.0 for Intel’s integrated device manufacturing model.. It represents a combination of Intel’s internal factory network, third-party capacity and the new Intel Foundry Services unit.
O’Donnell said Gelsinger is open to “any type of manufacturing and IP partnership possible” including use of Intel’s chip packaging technologies to put together tiles built for other vendors at other chip foundries into systems-on-chips within Intel facilities.
Analyst Jack Gold at J. Gold Associates took a cautionary tone in a note as well: “Intel has a lot of catching up to do if it wants to regain the lead in processing technology. While it may be difficult, we should not overlook the fact that Intel has massive resources it can apply to the problem and is building some important partnerships that can advance its capabilities.”
Gold called the news “ultimately a win for Intel” even as he noted Intel “began to stumble badly” several years ago in process technology and finds itself two to three years behind TSMC, Samsung, Qualcomm, Nvidia and many others. Getting ahead could take two to three years, at least, to achieve, he added.
Starting a new foundry business is the most controversial of what Intel announced on Tuesday, Gold added.
Patrick Moorhead at Moor Insights & Strategy said in an email that Gelsinger’s announcements gave him “many reasons to believe Intel is back if the company can execute its plans.” Intel’s use of Extreme Ultraviolent lithography will help Intel achieve its 7 nm node plans, he added.
Regarding the $20 billion for two plants in Arizona, he called the move “bold” and added: “Obviously if Gelsinger and board didn’t have confidence in its future capability reinformed by its end customers, it would not be making these investments. This isn’t Intel hedging its manufacturing bets—it looks to me as the company is all-in.”
The foundry business, IFS, Moorhead said, “is the first time Intel is actually, seriously doing what it needs to take to create a real foundry. It’s the first time I’ve seen the company commit to standard Process Design Kit models, standard design rules, and standard tools from Cadence and Synopsys. This is a requirement for other foundry customers who already use those models, rules and tools and enables import to and export from TSMC and Samsung.”
Moorhead summed up: Gelsinger “exudes technical and execution confidence and openness that I haven’t seen at Intel for years.”