(Bloomberg) – Intel Corp. unveiled a grand plan on Tuesday to restore its past chip-making glory. To succeed, new CEO Pat Gelsinger must adopt a strategy the old Intel never dreamed of: playing well with rivals.
“Intel is back. The old Intel is the new Intel, ”he said. “We are going to be a leader in the market and we are going to satisfy new foundry customers because the world needs more semiconductors and we are going to fill that gap in a powerful and meaningful way.”
Intel’s shares jumped 7% in the plan. However, essential parts of the strategy are new territory for a company that is used to doing everything its way. Intel has almost always designed and produced its semiconductors internally. Now, Gelsinger is starting a foundry that will make chips for other companies. And he also plans to use rival factories to outsource the production of more components from Intel.
This will create new complex relationships. For example, Taiwan Semiconductor Manufacturing Co. manages the world’s leading chip smelter. Intel is now invading TSMC’s terrain, while also hoping that this rival will make some of Intel’s best chips.
“TSMC will do as much for Intel as it thinks it should,” said Matt Ramsay, an analyst at Cowen & Co.
Read more: Intel’s $ 20 billion foundry plan hits shares of TSMC and Samsung
Before other chip companies commit to using Intel’s factories, it needs to fix its own manufacturing problems, the analyst added. Intel’s latest 7 nanometer production process was delayed and followed several missed deadlines for the previous 10 nanometer standard. Gelsinger said on Tuesday that these problems have been fixed, but analysts doubt it.
“We just don’t understand why customers would strongly support an Intel foundry, given that Intel is so far behind in process technology and doesn’t yet have the standard libraries needed to compete with TSMC,” said Chris Caso, an analyst at Raymond James.
Charles Shum, an analyst at Bloomberg Intelligence, said that major technology companies, such as Apple Inc. and Qualcomm Inc., would hesitate to transfer orders to Intel because they compete with the company in chip design.
TSMC can tackle Intel’s chip-making challenge: React
Gelsinger began his career at Intel in the 1970s and rose through the ranks to manage some of his largest units. He left in 2009, when Intel was approaching its zenith using a strategy he helped put into practice. Intel launched new products and new manufacturing technologies at a dizzying pace that competitors could not match, and PC and server customers built their product cycles around that. While he mentioned a return to the “ticking” discipline on Tuesday, Gelsinger will have to build on the recent experience he gained as head of software maker VMware Inc. to navigate a more complex world for Intel.
During a presentation with analysts on Tuesday, Gelsinger said that the way semiconductors are designed and manufactured has changed. Chip parts can now be made in different locations using different technologies and then combined into packaging. This helps designers choose the one that best suits their needs – and makes Intel’s old model of keeping everything under one roof less relevant.
Intel showed the logos of Qualcomm and other companies that it said are supporting its foundry drive. As geopolitical and trade tensions between China and the US escalate, customers want suppliers with facilities outside Taiwan, Intel said.
Read more: The world is dangerously dependent on Taiwan for semiconductors
Gelsinger is shaking the situation even more by doing something that his predecessors would consider sacrilegious. Intel used to zealously guard its X86 processor technology, the dominant instruction set for computer microprocessors. It will now be available as a design if Intel foundry customers want to use it. And they can combine that with rival approaches, such as those offered by Arm Ltd. and an open source standard called RISC-V, he said. Intel has tried and failed as a foundry before. This effort is different because customers will have access to Intel’s best manufacturing technology, said Gelsinger. And there are at least two new factories being built for this effort. “Our previous attempts have been somewhat timid,” said Gelsinger. “Customers will get the best that we have to offer.”
The new Intel CEO can generate enhanced EPS, Rating: Company perspectiveTo make your goals clear internally, Gelsinger created a separate division called Intel Foundry Services that will report its own financial performance and therefore will have to align with the interests of customers to make sure it meets “If he really dedicates himself to the benefits he is promoting today, it will put Intel in a much more competitive position,” said Cody Acree, an analyst at Loop Capital Markets, in an interview with Bloomberg Television. “You will have that honeymoon period that Gelsinger is in today, when people are looking for changes, for optimism, anything to hold on to Intel. This is the right thing to do. But it is also short-lived. “
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