11 ms·

Andy Grove famously said: "We have a simple strategy. We build fabs, and then we fill them." That is not just a glib remark. Intel builds leading edge fabs,

Andy Grove famously said: "We have a simple strategy. We build fabs, and then we fill them." That is not just a glib remark. Intel builds leading edge fabs, and runs them very well. Then it simply looks at every design it could run, and ranks them by gross margin per wafer. When the fab is full, low margin projects either run on non-Intel fabs or alternatively the teams get redeployed. And the kind of fab capacity Intel has is a strategic weapon. If Intel decides your corner of the market is going to be paved with silicon, prepare to get paved over. My take on Intel licensing ARM is two-fold: 1) They have decided the gross margin per wafer of running some ARMs is looking pretty good, and 2) they perceive a benefit of using Intel's fab technology as a strategic weapon to own as much of the ARM market as they want.

mafuyu 10y ago
The foundries have been consolidated to a select few, and it's been increasingly difficult for Intel to stay competitive on both the design and fab front. People have been talking about when Intel is going to spin off their fabs (or design, depending on how you see it), and I see this as being the first step.
Aissen 10y ago
Excellent remark. I'm wondering how they'd do that though. A quick search tells us a standard Intel CPU is in the 200-300mm² range. A server one might go to the 400-600mm² range. A high-end (higher margin) ARM SoC like the A9x is in the 150-200mm² range. I'm guessing it's the same for qcomm/samsung/lg's offering. How would it be more profitable to go from a $30-$50 SoC to an $300-$900 one ? Even when accounting for processor node differences (negligible between Samsung and Intel at 14nm or TSMC at 16nm), I can't see an ARM chip bringing high-enough margin. Unless they envision some magical tiny IoT chip that would be expensive ? Or that smartphone SoCs price will continue to go higher? What am I missing ? Are they preparing for the end of the x86 PC/Server market (hence the need to fill the fabs) ?
- ghshephard 10y ago
  I think you're touching on something important - the refresh cycle for PCs/Laptops is going to very soon be transitioning from the traditional 2-year cycle to 3-years, and, in the case of desktops, we're going to be seeing people run their systems for 4, even 5 years before considering upgrading. Combine this trend (which I think we can all agree on), with the fact that for a lot of people, their dominant computer is their smart phone/phablet, which is being refreshed every two-years, and you can see that fairly soon (if not already) Intel Fabs that focus on making chips for the desktop/laptop market will be underutilized - and there is a lot of capital tied up in those.
  - syshum 10y ago
    >the refresh cycle for PCs/Laptops is going to very soon be transitioning from the traditional 2-year cycle to 3-years, and, in the case of desktops, we're going to be seeing people run their systems for 4, even 5 years before considering upgrading. We have been on a 3/5 cycle for the last 10 or so years. (3 year laptop/5year desktop) We are likely moving to a 5/8 cycle with our current hardware. > their dominant computer is their smart phone/phablet, which is being refreshed every two-years, I am seeing less and less people willing to replace their phones on the 18-24 month cycle. The primary reason this occurred originally was cell phone carriers used the "upgrade" to lock people in to an additional 24mo contract. As we see less and less contracts and more people paying for their phones out of pocket or in installments, the replacement window is increasing, I expect by the end of 2017 to see the replacement be 36-48 mos for Cell Phones. This is especially true for any phone priced over ~$350. Most of this comes down to how long the OEM will continue to issue OS Updates for the hardware, if your phone is getting updates to the OS 36mos after you bought it there is likely very little reason to spend another $400 on a phone. We will likely see some Manufacturers/Carries taking the opportunity to screw over their customers by refusing updates after 24 months in order to extort them into a replacement. Hopefully the market responds to these companies by pushing them to bankruptcy but...
    - deleted 10y ago
      [deleted]
    - 10y ago
- petra 10y ago
  To extremely simplify the business: the company who has more r&d and capital spending will, to a large extent, win moore's law's. With current smartphones - TSMC and Intel are about equal in that parameter, and TSMC even beats Intel sometimes . Not good for Intel, but maybe livable. But now people are talking about augmented/virtual reality. lots of silicon. phones or phone like devices might take a big part in that.LG's chip will probably be for that purpose excatly . What happens if Intel loses that market ? maybe TSMC wins.
- deleted 10y ago
  [deleted]
- soulbadguy 10y ago
  I think part of the answer is that intel plan on selling over capacity and making money out what would have been basically unused fab capacity.
- ksec 10y ago
  As per your example i could never understand why Intel dont fab SoC for Apple. TSMC manage to make profit from Apple with a EST cost of $50 150mm2 A9X SoC. Intel could have fab for Apple only and suck out the money left for Samsung and TSMC. Now not only has Samsung and TSMC grow to build more Fab then before, they also have lots more to invest in R&D. My guess is that this is all too little too late for the Mobile Market ( if that is what they intended, ) Apple A11 (10nm) and A12(7nm, since it is an evolved 10nm much like the 20nm and 16nm) all this is pretty much set with TSMC.
  - Aissen 10y ago
    I see where you're going. Why not kill TSMC and Samsung by eating their revenue source ? Well, simply because Intel's revenue source has much better margins, and it means they can grow (and invest) faster than the competition. Provided they have similar expenses (which they don't). Also, using their advantage this way by selling at a cost might be borderline illegal (with regards to monopolistic and anti-dumping laws).
    - ksec 10y ago
      Yes, but it wouldn't be at cost, because Intel will be basically providing the same services as Samsung and TSMC, so i dont see law the come in play here. I specifically mention Apple because not only could Intel work their Modem ( Infineon tech ) within the SoC, it is also the single most important customers on the market. Arguably the only customer. There is really only three major volume Mobile SoC competitor, Apple, Qualcomm and Mediatek. The last one being on the low to medium end market which doesn't fit well with Intel. Qualcomm is an direct competitor to Intel in terms of IP and other cases. Only Apple which fits the bill, and actually will pay for using latest Fab Tech, both Qualcomm and Mediatek has many 28nm design.
mtgx 10y ago
What many fail to realize here, is that Intel is switching strategies to becoming a "dumb chip maker" (as a comparison to ISP's being "dumb pipes"). With Intel's help, now ARM chips will be even more competitive against x86 chips. So far at least Intel had an edge in manufacturing, and even then it couldn't keep up. What do you think it's going to happen now? Well, ARM chips are going to eat into its x86 business even faster. I'm not saying that this is a "bad" strategy for Intel, just that it could lead it to become just a foundry like TSMC in the end. But it remains to be seen just how well this strategy works, too, as I'm sure Intel will have a lot of "caveats" for chip makers, which will only detract them from using Intel as a supplier of manufacturing process.
- dbcurtis 10y ago
  Maybe so, maybe no. All ARM licensees differentiate by what they add around the core. Intel has the ability to add a lot of interesting things around the core.
- runeks 10y ago
  I don't know how others feel, but as an Intel investor, I prefer that Intel use the capital they have now (their fabs) to generate maximal profit, rather than speculate on whether alternative ISAs will take over as a result of not exclusively making x86 chips. Your strategy involves foregoing profit now, in order to hopefully make up for it later. I think you're missing the important point that Intel can take away market share from TSMC using this strategy, thus succeeding regardless of whether x86 or ARM wins in the end.

mafuyu 10y ago

The foundries have been consolidated to a select few, and it's been increasingly difficult for Intel to stay competitive on both the design and fab front. People have been talking about when Intel is going to spin off their fabs (or design, depending on how you see it), and I see this as being the first step.

Aissen 10y ago

Excellent remark. I'm wondering how they'd do that though. A quick search tells us a standard Intel CPU is in the 200-300mm² range. A server one might go to the 400-600mm² range. A high-end (higher margin) ARM SoC like the A9x is in the 150-200mm² range. I'm guessing it's the same for qcomm/samsung/lg's offering. How would it be more profitable to go from a $30-$50 SoC to an $300-$900 one ? Even when accounting for processor node differences (negligible between Samsung and Intel at 14nm or TSMC at 16nm), I can't see an ARM chip bringing high-enough margin. Unless they envision some magical tiny IoT chip that would be expensive ? Or that smartphone SoCs price will continue to go higher? What am I missing ? Are they preparing for the end of the x86 PC/Server market (hence the need to fill the fabs) ?

ghshephard 10y ago
I think you're touching on something important - the refresh cycle for PCs/Laptops is going to very soon be transitioning from the traditional 2-year cycle to 3-years, and, in the case of desktops, we're going to be seeing people run their systems for 4, even 5 years before considering upgrading. Combine this trend (which I think we can all agree on), with the fact that for a lot of people, their dominant computer is their smart phone/phablet, which is being refreshed every two-years, and you can see that fairly soon (if not already) Intel Fabs that focus on making chips for the desktop/laptop market will be underutilized - and there is a lot of capital tied up in those.
- syshum 10y ago
  >the refresh cycle for PCs/Laptops is going to very soon be transitioning from the traditional 2-year cycle to 3-years, and, in the case of desktops, we're going to be seeing people run their systems for 4, even 5 years before considering upgrading. We have been on a 3/5 cycle for the last 10 or so years. (3 year laptop/5year desktop) We are likely moving to a 5/8 cycle with our current hardware. > their dominant computer is their smart phone/phablet, which is being refreshed every two-years, I am seeing less and less people willing to replace their phones on the 18-24 month cycle. The primary reason this occurred originally was cell phone carriers used the "upgrade" to lock people in to an additional 24mo contract. As we see less and less contracts and more people paying for their phones out of pocket or in installments, the replacement window is increasing, I expect by the end of 2017 to see the replacement be 36-48 mos for Cell Phones. This is especially true for any phone priced over ~$350. Most of this comes down to how long the OEM will continue to issue OS Updates for the hardware, if your phone is getting updates to the OS 36mos after you bought it there is likely very little reason to spend another $400 on a phone. We will likely see some Manufacturers/Carries taking the opportunity to screw over their customers by refusing updates after 24 months in order to extort them into a replacement. Hopefully the market responds to these companies by pushing them to bankruptcy but...
  - deleted 10y ago
    [deleted]
  - 10y ago
petra 10y ago
To extremely simplify the business: the company who has more r&d and capital spending will, to a large extent, win moore's law's. With current smartphones - TSMC and Intel are about equal in that parameter, and TSMC even beats Intel sometimes . Not good for Intel, but maybe livable. But now people are talking about augmented/virtual reality. lots of silicon. phones or phone like devices might take a big part in that.LG's chip will probably be for that purpose excatly . What happens if Intel loses that market ? maybe TSMC wins.
deleted 10y ago
[deleted]
soulbadguy 10y ago
I think part of the answer is that intel plan on selling over capacity and making money out what would have been basically unused fab capacity.
ksec 10y ago
As per your example i could never understand why Intel dont fab SoC for Apple. TSMC manage to make profit from Apple with a EST cost of $50 150mm2 A9X SoC. Intel could have fab for Apple only and suck out the money left for Samsung and TSMC. Now not only has Samsung and TSMC grow to build more Fab then before, they also have lots more to invest in R&D. My guess is that this is all too little too late for the Mobile Market ( if that is what they intended, ) Apple A11 (10nm) and A12(7nm, since it is an evolved 10nm much like the 20nm and 16nm) all this is pretty much set with TSMC.
- Aissen 10y ago
  I see where you're going. Why not kill TSMC and Samsung by eating their revenue source ? Well, simply because Intel's revenue source has much better margins, and it means they can grow (and invest) faster than the competition. Provided they have similar expenses (which they don't). Also, using their advantage this way by selling at a cost might be borderline illegal (with regards to monopolistic and anti-dumping laws).
  - ksec 10y ago
    Yes, but it wouldn't be at cost, because Intel will be basically providing the same services as Samsung and TSMC, so i dont see law the come in play here. I specifically mention Apple because not only could Intel work their Modem ( Infineon tech ) within the SoC, it is also the single most important customers on the market. Arguably the only customer. There is really only three major volume Mobile SoC competitor, Apple, Qualcomm and Mediatek. The last one being on the low to medium end market which doesn't fit well with Intel. Qualcomm is an direct competitor to Intel in terms of IP and other cases. Only Apple which fits the bill, and actually will pay for using latest Fab Tech, both Qualcomm and Mediatek has many 28nm design.

mtgx 10y ago

What many fail to realize here, is that Intel is switching strategies to becoming a "dumb chip maker" (as a comparison to ISP's being "dumb pipes"). With Intel's help, now ARM chips will be even more competitive against x86 chips. So far at least Intel had an edge in manufacturing, and even then it couldn't keep up. What do you think it's going to happen now? Well, ARM chips are going to eat into its x86 business even faster. I'm not saying that this is a "bad" strategy for Intel, just that it could lead it to become just a foundry like TSMC in the end. But it remains to be seen just how well this strategy works, too, as I'm sure Intel will have a lot of "caveats" for chip makers, which will only detract them from using Intel as a supplier of manufacturing process.

dbcurtis 10y ago
Maybe so, maybe no. All ARM licensees differentiate by what they add around the core. Intel has the ability to add a lot of interesting things around the core.
runeks 10y ago
I don't know how others feel, but as an Intel investor, I prefer that Intel use the capital they have now (their fabs) to generate maximal profit, rather than speculate on whether alternative ISAs will take over as a result of not exclusively making x86 chips. Your strategy involves foregoing profit now, in order to hopefully make up for it later. I think you're missing the important point that Intel can take away market share from TSMC using this strategy, thus succeeding regardless of whether x86 or ARM wins in the end.