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Stratechery is usually very clever, but here misses a key point: Intel falling behind in node size is the problem, yet TSMC is not a direct competitor to Intel.
by yyyk 5y ago
Stratechery is usually very clever, but here misses a key point: Intel falling behind in node size is the problem, yet TSMC is not a direct competitor to Intel. Sure, TSMC competes against the new Intel foundry initiative, but foundry is not the main profit center. For the most part, it's the companies that buy TSMC's fab time that are competing with Intel.
So sure, Intel buying TSMC time helps TSMC. However, TSMC would have sold that fab time anyway, and gotten the same scale fabbing (say) AMD chips. It's much more useful for Intel to buy production and hurt the actual Intel competitors* that would have contracted for that TSMC time while still making profits for Intel.
Intel will still have enough scale to still grow its own processes, and it can probably rely on some help from Uncle Sam to further tilt the scales.
I'm frankly surprised that regulators haven't interfered - in most other markets people would have noticed the anti-competitive move (a manufacturer 'starving' their competitors' supply).
* Apple excepted, since they have more than enough cash to outbid Intel. Then again, Apple doesn't bother with servers, so Intel can live with this. Also, the Apple ecosystem is different enough that switching has its own complex set of upsides and downsides.
- lifeisstillgood 5y agoOther than AMD who actually competes with Intel (honest question). I mean for servers there is 686 descendants (Intel/AMD) and then ... err ARM on servers ?
- yyyk 5y agoAMD and also ARM on servers, like Amazon's Graviton. Intel beating TSMC in node size isn't going to happen in near term even in Intel's best case scenario, and even if that were to happen - fabs like TSMC will always have enough scale to compete. So Intel might as well buy from TSMC and take over its rival's production. Every chip Intel buys from TSMC is a chip taken from AMD and a spare chip Intel fabs could make.
- KerrAvon 5y agoDoes TSMC allocation work that way? Surely a client like AMD is paying up front to ensure capacity.
- yyyk 5y agoWell, everyone is paying upfront. It's competition for fab time, just in advance. Intel paying means AMD won't be able get the time Intel bought in the future. Of course, AMD won't have zero capacity - even Intel doesn't want that - but I doubt AMD paid for all the time they'll ever need. For one thing this is a seller's market, if AMD had more chips people would buy. Also, AMD has a well-publicized chip shortage to the point they contracted with GlobalFoundries again (for the less important chips) about a month ago.
- qsmi 5y agoIf this analysis is even half correct those selling x86 server CPUs need to be concerned. Today there is a huge moat in existing x86 software, sure, but savings like that can justify many ports. https://www.anandtech.com/show/15578/cloud-clash-amazon-graviton2-arm-against-intel-and-amd/9 https://www.anandtech.com/show/15578/cloud-clash-amazon-grav... "Cost Analysis - An x86 Massacre"
- kennethh 5y agoFor TSMC it is also good to have another big customer, otherwise they might become to dependant on Apple. Easier to get good pricing when they can say that we can sell the capacity to another big entity.