11 ms·

Intel Betting the Farm

121 points by chmaynard 5y ago

lmeyerov 5y ago
Interesting to compare to an innovator in this space like Nvidia, who is matching their hw expansion investments (arm, mellanox, .. : growing portion of the hw platform) with sw investment (deep learning, rapids etl stack, solution verticals, ...). Instead, Intel seems to be competing with... themselves and AMD? On the one side, it's heartening to see the investment, but on the other... surprising to not see any aggressive market-making / market-winning moves. $40B buys a lot of PhDs.
- fspeech 5y ago
  Intel is in manufacturing. Nvidia isn't.
  - lmeyerov 5y ago
    Intel can do whatever it wants... and it chose this. Ultimately it sells chips and services for running software. Nvidia originally made chips for video games, now it is part of self-driving cars, data centers, and even genomics. They are one of the biggest AI powerhouses now and not by accident. Google and other hyperscalar sw+hw seems to be competing more w Nvidia than Intel at this point. AMD way underinvested relative to Nvidia and we saw how that played out - I'm surprised Intel is doing the same. This stuff isn't secret.
    - fspeech 5y ago
      Intel was the leader in process technology. It was reasonable that they wanted to reserve the leading edge for their own higher maigin products. What happened was that smart phones eventually generated much higher volume than PCs, which gave TSMC the gross margin dollars to leapfrog in process tech. Meanwhile with less volume to amortize capital cost, Intel was conservative with EUV lithography. For a while they were actually hoping to get Nikon to be an ASML competitor in EUV. But to their advantage Moore's law has slowed down. They are still competitive in density, but they need to catch up on power consumption. This whole competitive dynamics is rather dissimilar to Nvidia's.
      - lmeyerov 5y ago
        I'm not saying throw out the business. But when most of it's revenue is selling chips for devices and data centers, and they are losing revenue despite strongly expanding markets, it's crazy to me that the main innovation investments are to double down on more of what isn't growing. Competing chip makers are showing how to grow on worse process technology by investing in software codesign and vertical codesign -- smarter designs, heavy compilers, heavy ai, heavy solutions, and going hard on the bigger markets within that. Likewise, the Google hw moonshots are more interesting in practice and scale, afaict. Intel knows this, and I'm sure there are clever internal proposals for other orthogonal approaches. But like AMD, even if that stuff is happening, these statements suggest it will be without muscle. This is like a worse repeat of how they approached the rise of mobile devices. I want them to do well, it's frustrating to see them under leverage so much $ and talent year after year when everyone else is doing so well.
        fspeech 5y ago
        Yes it was a mistake to go after wireless instead of GPGPU, which is an area that they could utilize their existing strength. But it would have taken foresight. Before 2012 Nvidia's gross margin was significantly lower than now. The graphics card business was not attractive. The demand from AI training wasn't apparent. By the time it became apparent Intel was aleady falling behind on process technology, which they must focus on now. Certainly from the architecture side if they can innovate on the integration of NN acceleration with their CPU and enable an open ecosystem of compilers they could regain some lost ground.
        lmeyerov 5y ago
        I don't think it was a mistake to go after mobile in general as much as in how in how they went after it. Apple, Google, Samsung, etc. approached the market differently so while most people talk about Intel messing up on the hw chip design, my meaning is they messed up the sw + vertical strategy for how to work with the market. I can imagine a world where they made made their own phone, OS, etc... just not with the current culture. If it was OK for a search engine + ads company to make their own phone designs + TPUs + OS + marketplace + apps + ..., why wasn't it for Intel? Building slightly better chips with light software support is 80s/90s thinking. They missed the wave in mobile, and I don't see the new CEO doing anything about using their position or $ to start competing differently. Jensen is inspiring in that he doesn't fight the last decade's battle: their architectures etc. keep getting better, but just as important, the market approach keeps evolving too.
beebeepka 5y ago
Frankly, I don't get why people are still rooting for the literal evil that is Intel. These guys did everything in their power to halt progress and milk everyone for as long as possible. They should've paid 10x in dages for what they did. I know the Stockholm syndrome is real but try to not fall for this guy's bullshit.
- KingMachiavelli 5y ago
  To be fair they contribute a lot to open source. I think the fact they have fallen behind so much actually shows they were struggling to improve. In comparison Nvidia's GPUs just always seem to be one generation ahead of AMD... Part of the issue is that they become a literal blue chip company which means paying a dividend and not focusing on growth. It creates a different company culture that can be hard to get out of.
  - aliswe 5y ago
    OpenCV is a technology that Intel open sourced, right? that tech would in itself suffice to prove the point - iirc
  - beebeepka 5y ago
    I think you're being too fair and intentionally sugar coating their recent history. Intel spent about a decade extorting money from a captive market after nearly killing AMD due to all sorts of illegal practices. It's hilarious how releasing the same product for a decade translates to "struggling to improve" all while making more and more money each quarter. I'll leave this here for you and the people who are downvoting me just in case you're not simply fanbois. https://jolt.law.harvard.edu/digest/intel-and-the-x86-architecture-a-legal-perspective https://jolt.law.harvard.edu/digest/intel-and-the-x86-archit...
h2odragon 5y ago
Didn't Intel sell their farm? To Samsung wasn't it? Bezos should buy the top say 6 levels of Intel management, and give them a new company whose sole focus is to keep any further advances in space travel from happening. That seems to be a high priority goal for him, and if the Intel folks can make the business pivot that's their jam just in a different market segment. The only way to extract any of the value still extant inside Intel, that I can imagine, is a deep breakup where the resulting entities are small, focused, single purpose shops... In other words, I don't see a way. Some Liquidation / Firesale move would be better and keep the foreign companies off the first auction.
- LegitShady 5y ago
  > Didn't Intel sell their farm? To Samsung wasn't it? no >The only way to extract any of the value still extant inside Intel Intel is still a massive company with fabs in a world with chip shortages. If your car chips that aren't available such that they're shutting down car factories, are then made on 14nm+++ no one should be concerned. Intel has plenty of runway to come back to competitiveness.
Nokinside 5y ago
This is the right strategy. Intel can't survive using the same strategy as GlobalFoundries (giving up high-end fabs). Intel has two legs. Intel microarchitecture business competes with fabless AMD, Apple, Nvidia, ARM, Qualcomm. And Samsung. Intel's chip manufacturing competes only with TSMC and Samsung in the high-end. Intel has always been the first and foremost chip manufacturing process company. Intel was founded by chemists. The competitiveness of x86 didn't come from superior chip architecture. It came from superior manufacturing and volume. There is the more expected value in risking the whole company and betting everything on high-end fabs, process technologies R&D than just competing with fabless. High risk, high reward.
- dsizzle 5y ago
  I get positive impressions that they might pull off their vision whenever I watch new CEO Pat Gelsinger, like here https://www.youtube.com/watch?v=MtYEmR9F8OM https://www.youtube.com/watch?v=MtYEmR9F8OM He's also targeting getting Apple back https://www.youtube.com/watch?v=QsrCOkIth_U https://www.youtube.com/watch?v=QsrCOkIth_U
  - gumby 5y ago
    > He's also targeting getting Apple back I doubt he seriously is, I think that’s just rallying the troops by setting an aggressive, aspirational target, acknowledging the humiliation and trying to use it. Which is what he should be doing so good for him. It remains to be seen if he’s another Lisa Su. The odds are against it but I’d be excited if he could pull it off.
  - sithadmin 5y ago
    If Pat's recent performance at VMware is any indicator...I wouldn't put that much faith in his ability to turn things around. He was very good for VMware early on in his tenure, but as competition from IaaS and other players making inroads in on-prem virtualization platforms intensified, his leadership seemed to falter. VMware began to churn and burn through acquisitions without much success, became entangled in a toxic relationship with Dell, and only managed to make marginal gains in terms of home-grown product innovation. The last couple years of his tenure were an especially noticeable period of decline, with massive losses in employee morale and retention, as well as continually degrading release quality. As a former employee (I left just before Pat did), I left the company with the impression that Pat and the rest of the execs were asleep at the wheel while the heads of various business units simply ran amok.
bobsmooth 5y ago
Hopefully its not too late.
jjcm 5y ago
Here's my worry with Intel - even if they get their fab to be competitive, they're still working against a market that's changing against them. The big players are all working on their own chips now and are pursuing SoC designs, rather than independent processors, and ARM seems to be the future trend. Amazon has their own chips for their servers, Microsoft announced they're working on their own chips, Google just released their first consumer chip this week, and the M1 is crushing the competition. I just don't see Intel succeeding with all of these things stacked against them. I hope they prove me wrong as more competition in the space is always good, but as it stands I'm not optimistic for their future.
- cmrdporcupine 5y ago
  Intel is an ARM licensee, and has made and can make their own ARM architecture based chips, if that's what the market wants.
  - NonEUCitizen 5y ago
    They sold XScale to Marvell many years ago.
- fspeech 5y ago
  There is no fab capacity to replace Intel, regardless of the relative performance of in house chip designs. In addition Intel itself is reserving capacity on TSMC's most advanced node.
  - khyryk 5y ago
    Yeah, this is a big factor. Everyone and their dog wants to design their own chips and fab them at TSMC, but it's simply not going to happen.
- dehrmann 5y ago
  They're all working on their own chips because there isn't a viable server ARM chip. I suspect they'd happily buy something like an M1 off-the-self it if existed. Even if the demand for SoCs goes up, Intel could play that market, too. And they have fabs that could compete with TSMC. The questions are mainly can they ramp up fab tech, ramp up CPU tech, and are they open to more custom hardware.
totalZero 5y ago
Intel isn't betting the farm. It's doing the bare minimum to build infrastructure that it will almost certainly need due to the demand created by massive shifts in the ways that we work, learn, and communicate. These companies care a ton about how long it takes for capital expenditures to bear fruit. Semi fab is one of the longest-term investments in the technology industry. Even a company as large and established as Intel still thinks like a company, not a government. Why is there a disincentive to spend on long-term investments? Look at INTC stock today and you'll understand.
mrandish 5y ago
This is really the only viable long-term strategy for Intel to return to sustainably profitable margins. The key question is whether the support of the board will waver in a few years when the going gets tough but they need to keep pouring capital into risky long-term investments which won't yet have begun to pay off.
rossdavidh 5y ago
Speaking as a former fab manufacturing engineer (back when AMD had fabs): 5 nodes in 4 years, is extremely optimistic. As in, I don't think it's ever been done in the history of the industry. On the other hand, several of those nodes have been running in production elsewhere for a while now, so it's not quite as crazy as it sounds. But, highly ambitious.
- bloodyplonker22 5y ago
  It really comes down to the people, and well, Intel doesn't have the best people today. They had a massive brain drain and those people are not coming back anytime soon considering how well their stock is doing at competing companies.
d_silin 5y ago
"Revenue will shrink from $77.7B to ~$74B and gross margins will fall all the way to 51% to 53% for the next few years" A far cry from betting the farm, really.
- pluc 5y ago
  betting the carpet in the house adjacent to the farm
- bloodyplonker22 5y ago
  That's actually abysmal considering how much the TAM will be growing in the next few years. Their stock price today reflects how abysmal this news is.
- hristov 5y ago
  Gross margin of 52% of 74bln of revenue is 38.5 bln gross profit. You take out 6 bln SG&A expenses (this is about what they have been spending the last couple of years), 26.5 billion of capital expenditures and 15 billion of R&D you end up burning 9 billion dollars of cash for the year. If they actually pay their dividend, that will be another 5.5 billion for a total of about 14.5 billion dollars of cash used up. That is a very risky situation to be in. One hears about startups burning cash but not in the billions. You have to ask Intel shareholders who have been used to a very reliable cash generating business that buys back a lot of shares, and pays nice dividends to use up 9 billion of their money in an year in the hopes that things turn around some time in the future. I am not sure what exactly constitutes betting the farm, but they are getting into some very risky territory.
  - cobbzilla 5y ago
    How big is their war chest? $9B would literally be pennies on the dollar to a company like Apple (>$1T reserves?). I doubt Intel’s is that big, but it might be big enough not to worry investors too much.
    - hristov 5y ago
      34.5 bln cash 40 bln debt.
georgeburdell 5y ago
Won't happen without attracting the best engineers, many of whom could be making a lot more elsewhere. So far, it looks like Pat has brought a bunch of old timers out of retirement, but I haven't heard of his plan to attract fresh blood. Recent grad compensation is abysmal.
torgian 5y ago
Only 52% gross margins? Oh, poor Intel. Boohoo. I guess that's "poor" for the board members. But, since the new CEO is an engineer, I have high hopes for Intel. I've always liked Intel, and I think they finally realize that they need to invest more and push more to compete against AMD. Gonna be interesting to see what comes out over the next several years.
- bloodyplonker22 5y ago
  That same new CEO was at VMware and let's just say the results were beyond underwhelming as they missed the entire move to the cloud.
  - jabl 5y ago
    I think it's a classical case of Christensen's innovators dilemma. Public clouds were/are an existential threat to their core business of selling expensive vsphere licenses for on-prem enterprise computing.
    - bloodyplonker22 5y ago
      Indeed, that and the fact that they actually attempted to create a public cloud (vCloud air) and failed. Nobody remembers it, and for good reason!
d3mon 5y ago
The article is incorrect. The author has likely confused GAAP vs non GAAP revenue when he talks about a decline. 2021 revenue projection is 73.5B, while 2022 is projected to be 74B. Checkout the official earnings report. https://d1io3yog0oux5.cloudfront.net/_150ab36dee7b2e1e66231df156ca8bdd/intel/db/887/8736/earnings_presentation/Q3%272021_Earnings_Presentation_Full.pdf https://d1io3yog0oux5.cloudfront.net/_150ab36dee7b2e1e66231d...
aliswe 5y ago
"... our leading-edge Intel 18A" whats an edge if not a leading edge? i guess the strange expression is accidental? that or im just ignorant of the english language
- fspeech 5y ago
  There is also the trailing edge.
yyyk 5y ago
IMHO, Intel has a very safe position for the next few years. First, it's a seller's market, there's no one who can replace Intel's chip output. They could have stayed on 14nm and still sell all their stock. Second, the US government is clearly not liking where the chip market is, and is going to spend a lot Intel's way. So income is guaranteed for that time. The real threat is in the longer term. If the company loses technical relevance entirely, and loses marketshare enough the market can replace them. Then the US gov pulls away and Intel becomes Via or GlobalFoundries. The current strategy is exactly the right one to prevent that: spend their current capital to be more competitive and regain marketshare. Meanwhile open up the foundry - both to be more receptive to external developments, and get easy money in the car sector. IMHO, there's no reason Intel can't pull this off. Unless management is entirely oblivious, and this one doesn't appear to be. Intel's scale is large enough to innovate, and they've had fat years to build up a cash reserve even before Uncle Sam gives an infusion. The previous position is unattainable, but Intel can remain a major player in the years ahead.

121 points by chmaynard 5y ago

Interesting to compare to an innovator in this space like Nvidia, who is matching their hw expansion investments (arm, mellanox, .. : growing portion of the hw platform) with sw investment (deep learning, rapids etl stack, solution verticals, ...). Instead, Intel seems to be competing with... themselves and AMD? On the one side, it's heartening to see the investment, but on the other... surprising to not see any aggressive market-making / market-winning moves. $40B buys a lot of PhDs.

fspeech 5y ago
Intel is in manufacturing. Nvidia isn't.
- lmeyerov 5y ago
  Intel can do whatever it wants... and it chose this. Ultimately it sells chips and services for running software. Nvidia originally made chips for video games, now it is part of self-driving cars, data centers, and even genomics. They are one of the biggest AI powerhouses now and not by accident. Google and other hyperscalar sw+hw seems to be competing more w Nvidia than Intel at this point. AMD way underinvested relative to Nvidia and we saw how that played out - I'm surprised Intel is doing the same. This stuff isn't secret.
  - fspeech 5y ago
    Intel was the leader in process technology. It was reasonable that they wanted to reserve the leading edge for their own higher maigin products. What happened was that smart phones eventually generated much higher volume than PCs, which gave TSMC the gross margin dollars to leapfrog in process tech. Meanwhile with less volume to amortize capital cost, Intel was conservative with EUV lithography. For a while they were actually hoping to get Nikon to be an ASML competitor in EUV. But to their advantage Moore's law has slowed down. They are still competitive in density, but they need to catch up on power consumption. This whole competitive dynamics is rather dissimilar to Nvidia's.
    - lmeyerov 5y ago
      I'm not saying throw out the business. But when most of it's revenue is selling chips for devices and data centers, and they are losing revenue despite strongly expanding markets, it's crazy to me that the main innovation investments are to double down on more of what isn't growing. Competing chip makers are showing how to grow on worse process technology by investing in software codesign and vertical codesign -- smarter designs, heavy compilers, heavy ai, heavy solutions, and going hard on the bigger markets within that. Likewise, the Google hw moonshots are more interesting in practice and scale, afaict. Intel knows this, and I'm sure there are clever internal proposals for other orthogonal approaches. But like AMD, even if that stuff is happening, these statements suggest it will be without muscle. This is like a worse repeat of how they approached the rise of mobile devices. I want them to do well, it's frustrating to see them under leverage so much $ and talent year after year when everyone else is doing so well.
      - fspeech 5y ago
        Yes it was a mistake to go after wireless instead of GPGPU, which is an area that they could utilize their existing strength. But it would have taken foresight. Before 2012 Nvidia's gross margin was significantly lower than now. The graphics card business was not attractive. The demand from AI training wasn't apparent. By the time it became apparent Intel was aleady falling behind on process technology, which they must focus on now. Certainly from the architecture side if they can innovate on the integration of NN acceleration with their CPU and enable an open ecosystem of compilers they could regain some lost ground.
        lmeyerov 5y ago
        I don't think it was a mistake to go after mobile in general as much as in how in how they went after it. Apple, Google, Samsung, etc. approached the market differently so while most people talk about Intel messing up on the hw chip design, my meaning is they messed up the sw + vertical strategy for how to work with the market. I can imagine a world where they made made their own phone, OS, etc... just not with the current culture. If it was OK for a search engine + ads company to make their own phone designs + TPUs + OS + marketplace + apps + ..., why wasn't it for Intel? Building slightly better chips with light software support is 80s/90s thinking. They missed the wave in mobile, and I don't see the new CEO doing anything about using their position or $ to start competing differently. Jensen is inspiring in that he doesn't fight the last decade's battle: their architectures etc. keep getting better, but just as important, the market approach keeps evolving too.

beebeepka 5y ago

Frankly, I don't get why people are still rooting for the literal evil that is Intel. These guys did everything in their power to halt progress and milk everyone for as long as possible. They should've paid 10x in dages for what they did. I know the Stockholm syndrome is real but try to not fall for this guy's bullshit.

KingMachiavelli 5y ago
To be fair they contribute a lot to open source. I think the fact they have fallen behind so much actually shows they were struggling to improve. In comparison Nvidia's GPUs just always seem to be one generation ahead of AMD... Part of the issue is that they become a literal blue chip company which means paying a dividend and not focusing on growth. It creates a different company culture that can be hard to get out of.
- aliswe 5y ago
  OpenCV is a technology that Intel open sourced, right? that tech would in itself suffice to prove the point - iirc
- beebeepka 5y ago
  I think you're being too fair and intentionally sugar coating their recent history. Intel spent about a decade extorting money from a captive market after nearly killing AMD due to all sorts of illegal practices. It's hilarious how releasing the same product for a decade translates to "struggling to improve" all while making more and more money each quarter. I'll leave this here for you and the people who are downvoting me just in case you're not simply fanbois. https://jolt.law.harvard.edu/digest/intel-and-the-x86-architecture-a-legal-perspective https://jolt.law.harvard.edu/digest/intel-and-the-x86-archit...

h2odragon 5y ago

Didn't Intel sell their farm? To Samsung wasn't it? Bezos should buy the top say 6 levels of Intel management, and give them a new company whose sole focus is to keep any further advances in space travel from happening. That seems to be a high priority goal for him, and if the Intel folks can make the business pivot that's their jam just in a different market segment. The only way to extract any of the value still extant inside Intel, that I can imagine, is a deep breakup where the resulting entities are small, focused, single purpose shops... In other words, I don't see a way. Some Liquidation / Firesale move would be better and keep the foreign companies off the first auction.

LegitShady 5y ago
> Didn't Intel sell their farm? To Samsung wasn't it? no >The only way to extract any of the value still extant inside Intel Intel is still a massive company with fabs in a world with chip shortages. If your car chips that aren't available such that they're shutting down car factories, are then made on 14nm+++ no one should be concerned. Intel has plenty of runway to come back to competitiveness.

Nokinside 5y ago

This is the right strategy. Intel can't survive using the same strategy as GlobalFoundries (giving up high-end fabs). Intel has two legs. Intel microarchitecture business competes with fabless AMD, Apple, Nvidia, ARM, Qualcomm. And Samsung. Intel's chip manufacturing competes only with TSMC and Samsung in the high-end. Intel has always been the first and foremost chip manufacturing process company. Intel was founded by chemists. The competitiveness of x86 didn't come from superior chip architecture. It came from superior manufacturing and volume. There is the more expected value in risking the whole company and betting everything on high-end fabs, process technologies R&D than just competing with fabless. High risk, high reward.

dsizzle 5y ago
I get positive impressions that they might pull off their vision whenever I watch new CEO Pat Gelsinger, like here https://www.youtube.com/watch?v=MtYEmR9F8OM https://www.youtube.com/watch?v=MtYEmR9F8OM He's also targeting getting Apple back https://www.youtube.com/watch?v=QsrCOkIth_U https://www.youtube.com/watch?v=QsrCOkIth_U
- gumby 5y ago
  > He's also targeting getting Apple back I doubt he seriously is, I think that’s just rallying the troops by setting an aggressive, aspirational target, acknowledging the humiliation and trying to use it. Which is what he should be doing so good for him. It remains to be seen if he’s another Lisa Su. The odds are against it but I’d be excited if he could pull it off.
- sithadmin 5y ago
  If Pat's recent performance at VMware is any indicator...I wouldn't put that much faith in his ability to turn things around. He was very good for VMware early on in his tenure, but as competition from IaaS and other players making inroads in on-prem virtualization platforms intensified, his leadership seemed to falter. VMware began to churn and burn through acquisitions without much success, became entangled in a toxic relationship with Dell, and only managed to make marginal gains in terms of home-grown product innovation. The last couple years of his tenure were an especially noticeable period of decline, with massive losses in employee morale and retention, as well as continually degrading release quality. As a former employee (I left just before Pat did), I left the company with the impression that Pat and the rest of the execs were asleep at the wheel while the heads of various business units simply ran amok.

bobsmooth 5y ago

Hopefully its not too late.

jjcm 5y ago

Here's my worry with Intel - even if they get their fab to be competitive, they're still working against a market that's changing against them. The big players are all working on their own chips now and are pursuing SoC designs, rather than independent processors, and ARM seems to be the future trend. Amazon has their own chips for their servers, Microsoft announced they're working on their own chips, Google just released their first consumer chip this week, and the M1 is crushing the competition. I just don't see Intel succeeding with all of these things stacked against them. I hope they prove me wrong as more competition in the space is always good, but as it stands I'm not optimistic for their future.

cmrdporcupine 5y ago
Intel is an ARM licensee, and has made and can make their own ARM architecture based chips, if that's what the market wants.
- NonEUCitizen 5y ago
  They sold XScale to Marvell many years ago.
fspeech 5y ago
There is no fab capacity to replace Intel, regardless of the relative performance of in house chip designs. In addition Intel itself is reserving capacity on TSMC's most advanced node.
- khyryk 5y ago
  Yeah, this is a big factor. Everyone and their dog wants to design their own chips and fab them at TSMC, but it's simply not going to happen.
dehrmann 5y ago
They're all working on their own chips because there isn't a viable server ARM chip. I suspect they'd happily buy something like an M1 off-the-self it if existed. Even if the demand for SoCs goes up, Intel could play that market, too. And they have fabs that could compete with TSMC. The questions are mainly can they ramp up fab tech, ramp up CPU tech, and are they open to more custom hardware.

totalZero 5y ago

Intel isn't betting the farm. It's doing the bare minimum to build infrastructure that it will almost certainly need due to the demand created by massive shifts in the ways that we work, learn, and communicate. These companies care a ton about how long it takes for capital expenditures to bear fruit. Semi fab is one of the longest-term investments in the technology industry. Even a company as large and established as Intel still thinks like a company, not a government. Why is there a disincentive to spend on long-term investments? Look at INTC stock today and you'll understand.

mrandish 5y ago

This is really the only viable long-term strategy for Intel to return to sustainably profitable margins. The key question is whether the support of the board will waver in a few years when the going gets tough but they need to keep pouring capital into risky long-term investments which won't yet have begun to pay off.

rossdavidh 5y ago

Speaking as a former fab manufacturing engineer (back when AMD had fabs): 5 nodes in 4 years, is extremely optimistic. As in, I don't think it's ever been done in the history of the industry. On the other hand, several of those nodes have been running in production elsewhere for a while now, so it's not quite as crazy as it sounds. But, highly ambitious.

bloodyplonker22 5y ago
It really comes down to the people, and well, Intel doesn't have the best people today. They had a massive brain drain and those people are not coming back anytime soon considering how well their stock is doing at competing companies.

d_silin 5y ago

"Revenue will shrink from $77.7B to ~$74B and gross margins will fall all the way to 51% to 53% for the next few years" A far cry from betting the farm, really.

pluc 5y ago
betting the carpet in the house adjacent to the farm
bloodyplonker22 5y ago
That's actually abysmal considering how much the TAM will be growing in the next few years. Their stock price today reflects how abysmal this news is.
hristov 5y ago
Gross margin of 52% of 74bln of revenue is 38.5 bln gross profit. You take out 6 bln SG&A expenses (this is about what they have been spending the last couple of years), 26.5 billion of capital expenditures and 15 billion of R&D you end up burning 9 billion dollars of cash for the year. If they actually pay their dividend, that will be another 5.5 billion for a total of about 14.5 billion dollars of cash used up. That is a very risky situation to be in. One hears about startups burning cash but not in the billions. You have to ask Intel shareholders who have been used to a very reliable cash generating business that buys back a lot of shares, and pays nice dividends to use up 9 billion of their money in an year in the hopes that things turn around some time in the future. I am not sure what exactly constitutes betting the farm, but they are getting into some very risky territory.
- cobbzilla 5y ago
  How big is their war chest? $9B would literally be pennies on the dollar to a company like Apple (>$1T reserves?). I doubt Intel’s is that big, but it might be big enough not to worry investors too much.
  - hristov 5y ago
    34.5 bln cash 40 bln debt.

georgeburdell 5y ago

Won't happen without attracting the best engineers, many of whom could be making a lot more elsewhere. So far, it looks like Pat has brought a bunch of old timers out of retirement, but I haven't heard of his plan to attract fresh blood. Recent grad compensation is abysmal.

torgian 5y ago

Only 52% gross margins? Oh, poor Intel. Boohoo. I guess that's "poor" for the board members. But, since the new CEO is an engineer, I have high hopes for Intel. I've always liked Intel, and I think they finally realize that they need to invest more and push more to compete against AMD. Gonna be interesting to see what comes out over the next several years.

bloodyplonker22 5y ago
That same new CEO was at VMware and let's just say the results were beyond underwhelming as they missed the entire move to the cloud.
- jabl 5y ago
  I think it's a classical case of Christensen's innovators dilemma. Public clouds were/are an existential threat to their core business of selling expensive vsphere licenses for on-prem enterprise computing.
  - bloodyplonker22 5y ago
    Indeed, that and the fact that they actually attempted to create a public cloud (vCloud air) and failed. Nobody remembers it, and for good reason!

d3mon 5y ago

The article is incorrect. The author has likely confused GAAP vs non GAAP revenue when he talks about a decline. 2021 revenue projection is 73.5B, while 2022 is projected to be 74B. Checkout the official earnings report. https://d1io3yog0oux5.cloudfront.net/_150ab36dee7b2e1e66231df156ca8bdd/intel/db/887/8736/earnings_presentation/Q3%272021_Earnings_Presentation_Full.pdf https://d1io3yog0oux5.cloudfront.net/_150ab36dee7b2e1e66231d...

aliswe 5y ago

"... our leading-edge Intel 18A" whats an edge if not a leading edge? i guess the strange expression is accidental? that or im just ignorant of the english language

fspeech 5y ago
There is also the trailing edge.

yyyk 5y ago

IMHO, Intel has a very safe position for the next few years. First, it's a seller's market, there's no one who can replace Intel's chip output. They could have stayed on 14nm and still sell all their stock. Second, the US government is clearly not liking where the chip market is, and is going to spend a lot Intel's way. So income is guaranteed for that time. The real threat is in the longer term. If the company loses technical relevance entirely, and loses marketshare enough the market can replace them. Then the US gov pulls away and Intel becomes Via or GlobalFoundries. The current strategy is exactly the right one to prevent that: spend their current capital to be more competitive and regain marketshare. Meanwhile open up the foundry - both to be more receptive to external developments, and get easy money in the car sector. IMHO, there's no reason Intel can't pull this off. Unless management is entirely oblivious, and this one doesn't appear to be. Intel's scale is large enough to innovate, and they've had fat years to build up a cash reserve even before Uncle Sam gives an infusion. The previous position is unattainable, but Intel can remain a major player in the years ahead.