Kissinger’s recovery plan hinges on his foundry program, which makes chips for other companies. He has promised Wall Street that he will start disclosing the names of those customers this year. Even just one big brand could help investors justify the 47% rise in Intel’s stock price over the past 12 months, as current Intel sales are slipping and the company’s once-touted profit margins are narrowing.

Image source Pixabay

The foundry program is Intel’s biggest strategic shift in decades. From the beginning, Intel’s business model has been to design and build its own chips, like the Pentium, Celeron, and Xeon, which power computers around the world. But today, Intel has lost its technological edge, leading some PC makers to switch to products from competitor AMD, while data center operators have even begun designing their own chips or turning to NVIDIA.

Entering the foundry market is a chance to show the industry that Intel has regained its manufacturing prowess,” said Kissinger, 62. “It seems to me that if we’re going to be big, we still have to be a foundry. Currently, we’re in the process of getting some customers.”

While Intel has not yet disclosed the list of customers for its foundry business, it has taken some initial steps. Ericsson has pledged to make some networking chips at Intel’s facilities. Amazon has also said it is considering using Intel’s factories to package chips. Qualcomm is also watching Intel’s chip-making technology.

Today, here’s what analysts and investors are waiting for a flagship customer willing to pay upfront to guarantee supply. If it’s true, as Kissinger says, that the list will be announced this year, then there are less than two months left. Kissinger said one customer had already paid in advance for future supply but did not name the customer.

Everyone is waiting,” said Stacy Rasgon, an analyst at research firm Sanford C. Bernstein. But even if Intel does announce the list, it will be a couple of years before it actually gets revenue. In short, there’s a long road ahead.”

As we all know, Intel has dominated the chip market for decades. Today, not only is its technology lagging behind, but its revenue is lower than TSMC and Samsung Electronics, and its market capitalization is only a fraction of NVIDIA’s.
Target 2025 to achieve technology leadership

Based on Kissinger’s plan, Intel wants to regain its technology leadership by 2025. As part of its comeback plan, Intel is building plants in Arizona, Ireland, Israel and Germany. Its biggest bet is a new plant in Ohio that is expected to be the largest in the industry.

Clearly, this is a costly operation. Upgrading and expanding factories wipes out Intel’s profits and depletes the cash reserves that once led the industry. Kissinger is also aware that it won’t be easy to outperform TSMC and convince potential customers of Intel’s manufacturing skills.

We’re well aware that TSMC and Samsung are really good at this,” he said. They’ve been doing it for 30 years, and we’re only two years in, and there’s still a lot to learn.” In 2021, Kissinger was appointed to return to the company as CEO after a 10-year absence, leading Intel to begin a new round of transformation.

But the positive side is that the demand for state-of-the-art chip production will only continue to grow. Also, customers want to diversify their suppliers and not concentrate too much.
Who will be Intel’s Foundry customers?

Gelsinger believes he is convincing the naysayers that Intel is making a comeback. The rebound in the company’s stock price this year has also verified this. But he also acknowledged that Intel still needs to win over a major customer.

“Ultimately, it will come down to whether Nvidia, Amazon, Google, Microsoft, Qualcomm or Apple believe they can build better products with Intel,” he said.

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▲ Source: Intel

Arcuri said that Intel’s independent operation of the foundry business is based on TSMC’s business strategy of “not competing with customers”, but the market’s response to Intel’s independent operation of the foundry business has been cold, and Intel’s stock price fell sharply today. 6%.

▲ Source: Intel

According to reports, Wei Zhejia, president of TSMC, previously publicly stated at a technical forum that the key to TSMC’s success lies in the trust of customers. “Customers succeed first, and TSMC can follow suit.” This is something that competitors cannot do. TSMC does not have its own products and will not compete with customers.

▲ Source: Intel

Arcuri said he has long believed that Intel should pursue an external foundry model. Considering Intel’s desire to develop the foundry business, increasing investment in advanced technology R&D, and restrictions on the US Department of Commerce’s semiconductor subsidy conditions, it is almost a foregone conclusion that Intel will abandon internal manufacturing and switch to the external foundry. Intel’s next step needs to be completely split The IFS department is responsible for wafer fabrication.

▲ Source: Intel

Arcuri pointed out that Intel should be split according to the model of the foundry business and fabless product business. Separating the financial statements of the two major businesses is the most important first step. Because Intel found in the survey that all potential major customers of the foundry business said that if they need to compete with Intel itself for foundry resources, they will not choose Intel’s foundry services. Arcuri predicts that Intel’s next step may be to completely spin off the foundry business to avoid concerns about competing with customers.

▲ Source: Globalfoundries

It is noticed that Intel CEO Pat Gelsinger hopes to replace Samsung in 2023 and become the world’s second-largest foundry business. In addition, Pat Gelsinger also said that appropriate firewalls will be set up to distinguish customer information and protect customer-sensitive design data.

▲ Source: Globalfoundries

According to reports, Intel’s biggest competitor, AMD, sold its manufacturing business Globalfoundries to the Mubadala Fund of the United Arab Emirates in 2008 and transformed it into a fabless semiconductor company. Globalfoundries is now the world’s third largest wafer foundry, second only to TSMC and Samsung, but if Samsung is excluded for its own chip foundry, GlobalFoundries ranks second.

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MediaTek will make use of Intel’s advance chip processing technology across a wide range of chips. These chips will serve as the brain behind many smart products. Currently, we know that MediaTek manufactures chips for wearables, laptops, smartphones, and a host of other smart devices.

Read also: TSMC and India’s cooperation will help the development of future semiconductors.

The chip shortage issue that we saw a few months ago also affected MediaTek’s business. Having another chip producer asides, TSMC will help the company stockpile chips in case of any shortage in future. This action will keep a constant flow of MediaTek chips in the market, in turn keeping the business alive. 

MediaTek’s corporate senior vice president of Platform Technology & Manufacturing Operations said that this multi-sourcing has been in the company’s bloodline. They have a standing 5G data card business partnership with Intel. Expanding their partnership to the Intel Foundry is just the next stage of both companies’ relationship.

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