Intel Reiterates: We Are Not Going to Spin Off IFS
by Anton Shilov on December 15, 2023 4:30 PM EST- Posted in
- Semiconductors
- Intel
- IFS
When Intel struggled with its 10nm process technology a few years ago, some investors suggested that the company would be better-off spinning its chip production into an independent foundry, leaving the core of the company to focus on chip design instead. Bucking these calls, however, Intel opted to keep chipmaking in-house, even going as far as to creating Intel Foundry Services to use those facilities to do contract chipmaking for other chip designers.
With the significant capital required to scale up the chip fab side of the business, it's a decision that, even today, Intel executives still get asked about. That was once again the case yesterday, at Intel's investor-focused AI Everywhere event at the Nasdaq MarketSite, where Intel CEO Pat Gelsinger reiterated that the company is not going to spin off their foundries.
"The idea of the internal foundry model, we think, is the right path for us in the current environment," Gelsinger told Reuters.
IFS is currently a distinct manufacturing operations unit within Intel that operates like 'an internal foundry', which the company then 'outsources' production of its processors and other products. Since returning to Intel, Gelsinger has been steadfast about wanting IFS to stay that way, keeping IFS an internal unit rather than to spin it off. It's a decision that's been in notable contrast to some other Intel divisions, such as Mobileye and the Programmable Solutions Group, which have been (or will be) spun off into separate businesses.
With that said, Intel will be bringing more transparency to the financials of its foundry division. Starting from Q2 next year, Intel will report financial results of IFS as if it was a separate business, which will give a clear understanding how much the unit earns and provide a better understanding of how IFS operations stack up against those of TSMC, Samsung Foundry, GlobalFoundries and other top contract chipmakers.
Ultimately, Intel believes that there are clear benefits to operating in a unified manner, especially, as explained by Gelsinger in his interview, that Intel is using the majority of the factory's capacity right now.
Source: Reuters
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Blastdoor - Saturday, December 16, 2023 - link
To support the capital expenditure, Intel needs scale. Once upon a time, the PC business was the biggest user of logic chips and x86 dominated the PC, so Intel operated at the largest scale.Today, the smartphone business is the largest scale user of logic chips, and x86 is nonexistent in smartphones. Taking smartphone SOC business away from TSMC isn’t impossible, but it would be very hard and would require intel to make risky business decisions.
But training AI models is now a rapidly growing business and much closer to Intel’s comfort zone than smartphones. There are many companies designing chips for AI, so it’s a competitive space. But it still might be easier for intel to attain sufficient scale through a combo of x86 and AI than by taking smartphone customers away from TSMC.
So I guess my point is — Intel needs greater scale to support the capex. AI might be the best way to get there.
lemurbutton - Saturday, December 16, 2023 - link
>But it still might be easier for intel to attain sufficient scale through a combo of x86 and AI than by taking smartphone customers away from TSMC.AI companies are moving away from x86. Nvidia is going to use their own ARM-based CPUs in the near future for their datacenter AI accelerators.
nandnandnand - Sunday, December 17, 2023 - link
It doesn't matter. Intel can fab AI chips and ARM CPUs. The x86 part of the combo is Intel fabbing their own stuff, and theoretically some of AMD's according to their public statements but that's not likely.eddman - Saturday, December 16, 2023 - link
I haven't kept up with the foundry news for quite a while. Has there been any information on what actually happened that caused them to suffer so much with their process nodes? Going from being ahead of everyone by quite a distance, to being a good chunk behind.If I remember correctly, there were some posts here and there that they went the wrong direction with 10 nm and hence had to basically start from almost scratch, which in turn caused a delay with future nodes, although they didn't say what exactly went wrong (at least in the ones I read). They could've been just guesses though and not based on anything concrete.
lmcd - Saturday, December 16, 2023 - link
Intel admitted they tried to do too many new features in 10nm at once. They definitely didn't start from scratch, but their ambitious targets for 10nm were highly competitive with TSMC 7 despite not using EUV with the node. Intel relaxed a bunch of the node's measurements and landed a lot closer to Samsung's 8nm (but without the heat problems), which was also a DUV node.At this point, any mistakes Intel commits are from unfamiliarity with EUV.
Blastdoor - Saturday, December 16, 2023 - link
I seem to recall that intel made several other mistakes. They laid off experienced engineers to briefly inflate quarterly profits; they didn’t compete as aggressively as they could have in the smartphone SOC market; and they skimped on capex. All of that to inflate short term profits and executive bonuses.If they could have had another Andy Grove as CEO, I bet they’d be in much better shape today. Gelsinger wants to be Grove-like, but it’s definitely an uphill clim.
Sahrin - Saturday, December 16, 2023 - link
Failing to spin off the fabs is going to go down as one of the stupidest business decisions of all time. If Intel had spun off in 2021, the fabs would’ve been worth $500B+ on the market - more than the combined company is now. It also would’ve solved Intel’s anti-trust problems.Instead, Intel runs a business that most customers are not stupid enough to buy from, because of Intel’s abusive history. TSMC and Samsung are better partners across the board, why on god’s green earth you would open your design portfolio and order book to Intel, one of the most savage companies in the industry, is beyond reason.
Gelsinger needs to be fired, and replaced with someone who has a better understanding of the strategic and financial landscape of the *future* of the industry. He’s 30 years out of date.
lmcd - Saturday, December 16, 2023 - link
The valuation will only improve after they deliver a Qualcomm and/or Nvidia chip as a win over Samsung.If they're going to spin it off, the soonest I'd expect is after a major win.
Kamen Rider Blade - Saturday, December 16, 2023 - link
I doubt IFS is going to get any significant volume of customers until it spins off.The potential for IP / Intellectual theft is too high, especially given Intel's dirty / savage history.
So, until IFS commits to the same seperation of "Church/State" or "Manufacturing/ASIC Design" as TSMC did so long ago, it's going to have a hard time finding customers.
Jimbo123 - Sunday, December 17, 2023 - link
You are the one being stupid, not Gelsinger. I am sorry.