Intel's in trouble, but they will have no difficulty sourcing the cash for any investments that promise to reverse the trend. The terms might be better or worse, but it's not like Gelsinger is going to have a great plan that just needs $20B and it just sits on a shelf because the investment can't be sourced.

Agree.

One perspective that I'm amazed hasn't become obvious to mainstream yet is that there are a growing number of private companies where are functionally extensions of the US government. Everyone knows about the US military-industrial complex, but they haven't clued in that the complex has grown and companies like Intel fall under that umbrella now. The CHIPS Act should have been a huge clue to anyone paying attention.

As long as the US government stands, regardless of who is in office and what letter is next to their name, Intel will not ever fail.

Intel may not ever fail, but that sure doesn't mean shareholders will reap any rewards. Boeing won't fail either, but has been losing huge chunks of money every quarter for 2 years now.

The CHIPS and Science Act is nowhere near a qualitative shift away from the investor-centric mentality of managing a public company. Many investors are short-term greedy and don't learn much about the real goings-on of the company. It makes a few things cheaper, but if you compare to TSMC and Samsung it's quite clear that Intel doesn't get anywhere near the amount of government money or political power that its competitors at the leading edge happen to have in their respective localities.

Won't fail but their stock can and likely will continue to fall for quite some time.

When its self-professed peer state adversaries are Russia and China, is it surprising the US is bending more towards national champions?

It's the logical move from the national security perspective but I hope this doesn't turn into another Boeing aerospace monopoly fiasco where we saw the space program effectively stagnate for 30 years due to lack of competition.

Disruptors in the chip manufacturing space are bascially gonna have to grow these things in petri dishes if we get locked into a government owned monopoly

I look at it as internal / external competition.

Even the heavyweight, plodding military-industrial companies were innovative when they were being driven by external, nation-state competitors.

Intel should probably think about reducing the dividend and focusing on plowing that money into investment in their business for a while.

That would destroy the stock price, and executives get paid largely in stock.

Not agreeing or disagreeing, but have you seen the stock recently? Surely at some point you have to ask if it makes stop prioritising the stock price and investors, and instead focus on the long-term sustainability of the company?

I’ve been watching both Intel and Meta stock with interest. They’re in a fairly similar situation. The reason why Intel trades at a P/E of 15 while Meta is hovering around 10 must be mostly the dividend. The market doesn’t trust Zuck but it still has some trust in Gelsinger to somehow balance the dividend with the massive fab investments.

If Intel gives up on the dividend, they could be down another 30-40% to Meta-like P/E levels.

It would just be a question as to whether the reinvestment would be expected to yield a high enough return. Theoretically, at least, if the dividend is being repurposed for investment and the market believes that that reinvestment will drive enought growth, then the stock price could stay flat or even go up. Especially in the current environment where there aren't many good places to invest capital.

I'd think that scenario is fairly unlikely though, and in any situation where the dividend goes away volatility will certainly go up.

Not only do the markets not trust Zuckerberg. But since he still has a controlling stake in the company, the stock should trade at a steep discount since stockholders have no say in the company.

But Intel would presumably be investing the forgone dividends in something that looks better to investors than the metaverse moneypit.

Meta is doing buybacks, which is just another form of dividend, so in that regard they are not that different.

Precisely this. As an executive, it is better to pay dividends and have the company borrow if needed.

I don’t think the situation is that dire for Intel. AMD was in a much worse competitive position not that many years ago.

An industry wide slowdown will affect all companies mentioned in the article. Intel has over $25B cash on hand and history has shown investors are willing to let companies (ie Uber) lose many billions every quarter for a long term return.

AMD and Intel have been flip flopping on who creates the best cpus for decades. I’m sure that has been the result of a mix of great engineering talent as well as luck during R&D. I have no doubt this battle is going to continue for many more decades.

intel went down, back to their 2014 price with, what looked like, one corrupted board after another.

The comment my "about" quotes resembles investors' emotions rather well. And markets are - at least currently - not very reasonable.

Also: AMD and RISC-V.

Yah, they should have been panicking four years ago. They can probably come back, but i'm betting in order to do it, they will have to temporary shift their higher margin devices to TSMC's more advanced process to keep up or just accept being second fiddle for a while. The question is whether all the cuts required to do that kill the company as they are forced to exist on the low margin devices they have been shunning for the past 15 years.

We better hope they come back. TSMC is a really impressive company, but we can't let one company be entirely responsible for a part that is require for an advanced economy.

You mean like ASML already is? They are the only manufacturer of EUV lithography equipment for fabs.

https://analyticsindiamag.com/is-asml-the-most-important-tec...

Yep, they are another good example.

Intel is really not that far behind TSMC in the grand scheme of things, though, so it would be good to hang on to them before the situation is totally hopeless.

I'm not aware, at least, of any US competition to ASML.

Except that Intel currently fabs ASICs for roughly 0% of the cell phone market. TSMC has a massive lead on that front. Intel selling off StrongARM 16 years ago was massively shortsighted.

ASML is a bigger single point of failure, since they make the machine most critical to any modern fab from Intel, TSMC, or Samsung.

Sure. Intel and their competition sell directly to consumers, so any tech savvy person is at least vaguely aware of their relative positions in the market. I'm less familiar with ASML (other than the fact that, of course, they make that important part) -- haven't looked into setting up a fab! Do they have US competition that is "pretty close" in the same sense that Intel is to TSMC?

ASML bought out their US competition decades ago. Nikon and Canon used to be their main competition in lithography machines, but both of them fell behind even before EUV.

ASML's EUV tech was originally funded by the US (EUV LLC, joint industry/government collaboration from the late 90s), and that is why the US can still impose export restrictions on ASML to China.

ASML was spun out of Philips which is not a US company so I'm not sure how accurate it is to claim this as a main factor.

Government/industry consortiums on both the US and Europe sides ended up joining efforts. EUV LLC on the US side, EUCLIDES (Extreme UV Concept Lithography Development System) on the EU side (in which ASML and Philips was involved). The EUV LLC part is why the US can still prevent export to China of ASML's EUV technology.

ASML didn't come out of the US, but rather parts of their EUV technology did and the US still holds some rights to export controls through that history.

No one else produces the equipment that supports this production process.

I model it like a sovereign default risk, only the sovereign is a corporation.

This is why it's crazy the Fed is trying to tank the economy the same time Congress is trying to do a CHIPS act. Crazy!

If you are trying to do industrial policy you want to run the economy hot, more demand means less need to subsidize, and all the administrative and conflict-of-interest headaches that come with that.

It seems perfectly reasonable to do both. One may want to cool the economy as a whole to fight inflation, while boosting the local semiconductor industry to gain some digital independence.

The reason we have a chip shortage in the first place is that slow growth has rationalized underinvestment. I suppose we can have a reshored chips industry by handing out electronics coupons in a recession, but that is a really blunt instrument with high distortion risk.

It's not like all chips are fungible or whatever, there is a real risk of subsidizing the "wrong thing" without a broader macroeconomic story (which could be planned in theory, but won't be in the US so we must rely on markets) to validate the "end use values" --- ensure the downstream benefits are extent to discipline the upstream chip production why also incentivize it.

The good thing about finding bottlenecks in a high pressure economy is those are the actual problems to be solved. But problems shift --- the goalposts actually aren't fixed --- so better to keep things high pressure the whole time.

Demand is largley irrelivant here as these fabs will not be opening in the short term. As long as rates drop when the fabs are completed it will be fine. Besides DoD have almost ulimited funding, and they want this. Remeber the $10B they gave to MS for those useless helmets?

Monetary policy acts on aggregate demand with long and variable lags. This is the consensus position. The latencies are comparable, with plenty of uncertainty about each.

If you are the Fed in one hand, and CHIPs in the other hand, it is like being in a pool of molasses trying to make a waves in a long jump rope that don't interfere once they meet in the middle.

Controlling persistent high inflation is way more important to the nation than homegrown chips right now.

Hard to say.

I am seeing the service economy wracked by a failure to invest in people, process and technology. Go to a restaurant, hair salon, pharmacy, or attempt to ride the bus (the one I ride in the morning has been canceled) and it is right in front of you.

I know just enough process science to be dangerous, but something I see in all of these cases is very long queues which themselves become a source of disruption and chaos. People seem to think that being willing to wait in line is a sign of maturity, but it is reduced to practice people seem to almost universally not understand that your doctor can't see more patients by making them wait longer.

I was at a Dunkin Donuts the other day and rather shocked that, because of a lack of hash browns, the kitchen was unable to serve any customers waiting in the drive through for almost 30 minutes.

The anti-inflationist would say the problem is that people have money in their pockets to order hash browns that the restaurant can't serve and if we crashed the economy hard enough demand would collapse below supply. My fear is that, without the capital being there to invest in people, process and technology, supply will collapse and we'll be stuck with an economy where "nothing works" but the level of demand keeps dropping.

Customers are generally more forgiving of long lines and quality decrease than price increases.

The value of time is subjective and often not purely rationally weighed. People will run a red light to save 35 sec. but then lay on their couch for two hours.

It is not the latency which is killing that Dunkin Dounts, but the throughput.

It could be the customers think waiting in the drive through line is a great use of their time but the workers who could be serving customers who don't want hash browns are left twiddling their thumbs because the drive-through is serialized.

Drive through service is inherently inefficient. Barking your order into a speakerphone a meter or more away or through a window. Cars idle and form a line that can backup into a road. I wish more people would park and walk in.

It really makes more sense to require order ahead and time boxing. That way people can just drive up to a window, take their bag, and go. Most places that you order online, they just make it when you show up. You never really save any time. Arby's is a bit interesting, they make you pick a time, and the store doesn't even get the order until 5 minutes before the time you said you'd be there.

As it stands today, it's mostly useless, because you still have to wait in the drive thru behind people just ordering now.

I propose the better model is the drive thru is for people who've ordered and paid already, and have shown up at or after their requested time. Cancel anytime up until five minutes prior. People who've not done so must park and walk in to order.

You've got to see the McDonalds near the Ithaca Mall. They split the line into two streams to take your order, have a single window for payment and they will send you to an alternative pickup window or one of three parking spaces if your order is not ready at the main pickup window. The people there have an espirit de corps I've never seen at a fast food restaurant.

But seriously, there is no excuse for inefficient businesses. If a business is inefficient the customers, owners and employees are paying for it. Sometimes it takes very bad business conditions for people to stop making excuses, unfortunately it also takes the bankruptcy court too often.

To me both of those examples seem like a preference to not change inertia/vector. I see your main point.

There is no bus route anywhere that has been canceled due to interest rates.

Not yet.

There is no evidence that inflation under 40% poses serious economic problems.

There is no evidence that the current inflation is caught in something inertial like a wage-price spiral.

>This is why it's crazy the Fed is trying to tank the economy the same time Congress is trying to do a CHIPS act. Crazy!

Aren't these on wildly different timelines? Anything created in the CHIPS act won't be cranking out chips for 5 or even 10 years, right? But inflation corrections can happen in a year or two.

The CHIPS act is almost like insurance, in my opinion. If everything goes great in the future we don't need the CHIPS act and it retroactively feel kind of silly. But if something goes wrong (not necessarily human made decisions, an earthquake in the right place...) we'll be glad we could have a softer landing.

> But inflation corrections can happen in a year or two.

Monetary policy sucks, there is little evidence of it ever creating a soft landing. (As opposed to regular market forces incentivizing more supply and fixing the issues on its own.)

Also, the consensus view is it takes up to 2 years just to come in effect! The Fed is probably creating a 2023-24 recession right now just as the Ukraine war and other sources of supply disruption stop being a problem!

Some things are more important than the CHIPS act.

There is little evidence inflation below a huge 40% or whatever causes any serious problems.

Tough situation to navigate out of. They lost the process lead, now TSMC in particular does so much more volume that Intel is at a significant scale disadvantage (makes it harder to catch up). The margins in the historically lucrative server business are under threat as Xeon has to compete with hyperscalers' in-house chips as well as credible alternatives from AMD. Moore's law is over so the big performance jumps that justified rapid PC refresh cycles are gone. They have trouble entering new markets themselves and their M&A track record is poor. It seems very possible that Intel will never return to the strong position they enjoyed ten years ago.

I think that's largely true, but it's also worth pointing out that "Moore's law is over" means that they don't have much "catching up" to do. The truth is that all semiconductor vendors are heading for a future where they're selling an undifferentiated commodity product.

Sure, Intel isn't going to be able to sell Xeons for $1k a pop in a future where anyone can go get their chips fabbed at TSMC. But neither is TSMC going to be able to command the margins they do right now if Apple and NVIDIA know they can trot right over to Intel to get a better deal.

To me, the story here is much more "maturing industry is losing its margins" than it is a two-way horse race.

I mostly agree, and the compaction of value accrued at the lower layers of the stack are a real thing, but there are two wrinkles to the industry that I find interesting. First, like advanced turbine engine technology semi development continues to get more expensive as it matures and that drives consolidation rather than proliferation. Second, for now the end of Moore's law for companies with high pricing leverage looks like a move from "more for less" to "more for more" where they use performance and vertical integration to create a moat around their part of the market. You can see this in Apple shipping chips that are multiples larger than previous laptop processors, or NVIDIA pushing performance up but jacking prices up a the same time. Intel is going to have a hard time putting a 400mm2 chip into a Dell laptop at pricing and margins everyone can live with. At the same time they're going to have a hard time making margin on Xeons and still being competitive in TCO terms with whatever the Annapurna team can cook up for AWS using ARM IP on TSMC. This is all a roundabout way of saying unlike say the early PC industry I don't think maturing is going to level the field or lower prices, actually the opposite.

The differentiator in the server space comes in power management and thermals, all things that AMD does better than intel. AMD also has better yields and better margins because of their chiplet design philosophy.

ARM also has a significant thermal and power edge.

Intel is chasing the top, but actually they should be thinking about efficiency.

The problem is that Intel competes with Apple, Nvidia and AMD. They have a conflict of interest, just like Netflix has with content producers, and that's going to cause issues for their growth.

>The truth is that all semiconductor vendors are heading for a future where they're selling an undifferentiated commodity product.

This is what I'm hoping for as well. But there are huge upfront costs (>20b). This will limit the number of potential players.

The upfront cost may plummet if you don't need to redevelop and replace your entire tooling every five or so years.

This is an excelent point I hadn't thought of. The industry is currently chasing itself upward, which prevents the supply chain from maturing.

I found that the cost to build a 65nm plant was $1.2B in 2021[0] which is a pretty mature node and that's still a large upfront cost, and smaller nodes would be even more expensive. So it's hard to say how low prices could fall.

[0]https://finance.yahoo.com/news/bosch-inaugurates-1-2b-factor...

Roughly what are TSMC's volume compared with Intel's on their leading logic nodes?

Hard to tell, TSMC's faster cadence means you'd have to get a snapshot of total output on N7 and newer but I don't think they break that out. They report numbers here and there in the press but usually only for the new process they're promoting and for example a lot of N7 from two years ago probably got cannibalized by N5 etc. For N5 and newer Intel doesn't have any equivalent process, and it sounds like they will be doing some products on TSMC at N3? If you did a histogram of wafers by effective feature size I think the shapes for Intel and TSMC would be very different but we know TSMC has at least two big customers selling N4 product today (Apple and NVIDIA).

If only there was a way for, let's say, the most powerful money printer in the world to grant / loan money to Intel so that they could onshore state-of-the art chip production in the interest of national security.

A serious government would extract concessions for any grants (shares of profit), an seriousness one would just give the money over and be like "Trickle down baby".

Four words: Too big to fail.

Dark days ahead for Intel.

The dark times were 2012-17, only just recently in the past 3 years have they gotten off their ass in price to performance. They are now steadily improving.

The innovator’s dilemma, right?

Not really IMO. Intel's established product lines are plenty profitable... or they would be if Intel wasn't failing to deliver the basics.

Is there any market segment they are currently competitive in?

I can't think of one.

Even in their darkest days, AMD was winning the "$100-300 desktop with an integrated GPU" segment by a large price-performance margin (vs Atom processors).

Intel is leading in lower-end desktop CPUs like the 12100, 12400, and 13600K.

New intel cpu is competitive in gaming, but with the sacrifice of the power. And amd still has the counter play with 3d cache version which crushes intel on every metric. So yeah..

They win absolute performance on Desktop CPUs but lose on perf-per-watt. An argument could be made for AMD's 5800x3d in gaming, but when paired with a 4090, the intel CPUs take the lead.

> when paired with a 4090, the intel CPUs take the lead

Crypto mining is out, but enterprising gamers can now defray their costs by operating a steam turbine with waste heat.

Or making an impromptu campfire!

> They win absolute performance on Desktop CPUs but lose on perf-per-watt.

How is that possible? They have better thermal design or something?

Intel allows the CPUs to draw significantly more power than AMD does.

These are about the most reliable benchmarks you can find on the internet:

https://youtu.be/todoXi1Y-PI?t=342

What's preventing AMD from allowing the same?

Heat distribution as far as I can tell, this video from derbauer shows that shifting the way the cooler contacts the CPU lid (aka offset mounting) can provide drastically lower temperatures which means the cpu is allowed to draw more juice. In the video [1], there's an 8% improvement which tbh is massive; though it seems that the creator missed that, so ignore the conclusion, look at the numbers. An 8% improvement would have put AMD in the lead with intel unable to compete.

https://www.youtube.com/watch?v=0mPi6DjGZpQ

no, they just require bigger coolers.

right, pair your $400 CPU with a $1400 video card, and man, look how fast it is for graphics applications!

Here is the catch; when Intel and AMD presented their slides, nobody could disclose information about the Lovelace performance, and therefore all comparisons were made using a 3090ti, and in that scenario, even in Intel's own graphs, the 5800x3d was actually performing very well; so much so that they were playing coy with its performance;

https://www.rockpapershotgun.com/intel-announce-13th-gen-rap...

AMD has a huge gaping pricing hole between AM4 and anything AM5, which makes Intel 13th gen rather more attractive. And the 5800X3D is actually faster than the AM5 parts in some titles iirc

>Is there any market segment they are currently competitive in?

Intel is winning mainstream CPUs right now. Partly because AMD priced their new chips too high at launch, and partly because total system cost for AMD is higher because the motherboards were also more expensive, and you had to use more expensive DDR5.

AMD has been cutting prices, motherboards are getting cheaper, and DDR5 memory is falling. So the difference is less and less. But for the last year or so Intel was best choice for a new system, though the AMD 5800X3D was solid as a pure gaming value build. (Still is, actually.)

I am actually a little confused how Intel fabs can be considered far behind TSMC but their desktop consumer CPUs have been better or at least roughly equal to AMD in the last year. Is Intel just making lower profit margins and eating the cost to compete?

They have some very low power but decent performance cpus like the Pentium Silver N6000 series, but I don't know if they view them as good for lowend NUC like machines.

I would certainly be interested in buying some, just not in the form of the lowend laptops they are currently in.

intel is ahead on the top end of the consumer market with its latest gen of processors, in single threaded up to reasonably multithreaded. usually a single thread is pacing for games, even simulations, though it shouldn't be. it's hard to parallelize

Mindshare. No one got fired for buying IBM/Microsoft/Cisco/Intel/AWS.

I've seen this in action professionally and it drove me up the wall.

At a previous job I had to spec out some hardware procurement on the order of a million dollars over two years, and all of my compute was based around AMD EPYC. The amount of fighting and arguing that this resulted in was wild. These were all still supermicro boxes, still from the same trusted vendor we were using, but I had to spell out many times that we were basically getting double the compute for what we would have got otherwise.

Worst part was when the first shipment arrived and nothing booted and worked and turned it out be a bad batch of drives from micron that had bad controllers, the same ignoramus used it as a "I told you so" moment, even though the vendor confirmed it was a micron issue and immediately shipped over replacements.

Any public company can get money to fund investments. Netflix has been borrowing money for a decade until recently to fund content at junk bond rates. Intel could probably get much better deals

Intel has been doing the opposite - borrowing money and using profits to do $70B in share buybacks.

The executives get better short term returns on this than by spending money on R&D.

I remember two decades of Intel having unrivaled smallest fab process and AMD always having larger, hotter chips. To see Intel lagging behind is so unnatural.

x86 is the way to go and will be the best at least for the 10 next years… intel needs some time but I dont worry

Not sure how you can say 'x86 is the way to go' for the next 10 years given how much progress Apple has made with it's M* processors over the last few years. Sure, Apple keeps all of it's processors to itself, but if they were able to do this over a few years, others surely will be able to as well.

I switched to M1 laptop from Windows when it came out and I'm not planning to go back.

I'm waiting for the next TSMC process node for my next laptop purchase.

Not really, it doesn't make sense, I liked Windows 7, but the newer ones not that much.

Come back to where? Are CPUs gold mine? It is saturated and highly competitive market. Maybe they achieve leadership again in performance or some other metrics, but how would that turn into profits?

Maybe they should go all in on RISC-V or another open-source instruction set and get ahead of what's going to be the future of chips in the long run.

Compare to pre-pandemic/crypto bubble figures (a couple years back) and then maybe there's something worth talking about.

All of tech was in a nonsense bubble because of the pandemic and crypto. Now that it's over(ish), things are going back to normal.

At the high end, Apple isn't in this market. ARM designs don't really compete well (yet). Graviton3 is great value but it does not unseat EPYC or even Xeon for raw performance.

Most servers don’t need raw performance from a single chip they can do their workloads by horizontally scaling.

Are you referrinng to their silicon processes, or their IP?

AMD doesn't even have a process do they? So it's presumably about x86_64 and associated IP.