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Honestly, this is one of the reasons I think Intel's stock is likely undervalued at this point (not that I want to invest my money with management I don't feel

by mdasen 2y ago

Honestly, this is one of the reasons I think Intel's stock is likely undervalued at this point (not that I want to invest my money with management I don't feel confident in). Intel is facing a lot of threats and they rested on their laurels. At the same time, Intel is still 75-80% of the market - even as AMD started killing Intel in performance for several years. I'm less sure that Intel will hit its fab milestones than Intel's press releases, but I'm also not sure that AMD can really take advantage of that. AMD is reliant on TSMC's capacity and as we've seen recently, AMD often has to wait a year or two before it can use TSMC's latest processes. Even AMD's upcoming Zen 5 processors will be using TSMC's 4nm N4P process (with future Zen 5 processors expected to be 3nm). If Intel is able to get 18A out the door in 2025, Intel's fabrication will certainly be competitive with what AMD can get (and likely quite a bit better). From what I've read (and I might be wrong), it sounds like Intel is moving to High NA EUV soon (now-ish/2025) while TSMC is waiting until around 2030 (https://www.tomshardware.com/tech-industry/manufacturing/tsmc-to-adopt-high-na-euv-tools-in-2030-or-later-report https://www.tomshardware.com/tech-industry/manufacturing/tsm...). Is TSMC falling into the trap of letting a competitor out-invest them - the same trap that Intel fell into ~2012-2022? Probably not, but it does seem likely that the advantage TSMC had will taper away over the next couple years - assuming Intel isn't full of crap about their progress. Even if TSMC maintains a lead against Intel, can AMD take marketshare? Specifically, can AMD produce as many chips as demanded or are they somewhat limited by how much capacity they can get from TSMC? For example, if people want X number of AMD server chips, does AMD manufacture 25% of that number and 75% of customers buy Intel chips because that's what is available due to AMD's lack of fab capacity? I'm not saying that is the case - it's a genuine question for someone that knows more about the industry than I do. We do know that TSMC has limited capacity. Apple tied up TSMC's 3nm capacity such Apple is the only company shipping 3nm parts. It looks like Intel will be the next company shipping 3nm parts with their Lunar Lake using TSMC's N3B process this fall. I'd also note that Intel's fabs aren't unlimited either. Meteor Lake moved to Intel 4 in December 2023, but Emerald Rapids (server) remained on Intel 7 at the same time. Intel can't just churn out as many Intel 4 chips as they'd like. I too wonder how/why AMD is still below 25% marketshare given Intel's issues. I wonder if AMD has limitations on how much fab capacity it can get which is stifling attempts at gaining marketshare. At the same time, it looks like Intel is on a course to fix its issues - if one can believe what Intel is saying. If Intel is able to ship 18A chips in 2025 at volume, it seems like it should fix the big issue that Intel has been facing - inferior fabs. AMD has been able to out-do Intel in part because it's been able to rely on TSMC's better fabrication. Is this just a blip where Intel looks bad 2020-2024? That's a genuine question because I don't really know enough about the industry. Maybe someone will say that Intel's PR is mostly bluster and that they're still being run by beancounters trying to optimize for short-term profits. Maybe someone will say that Intel is investing in the right direction, but there's still a lot of risk around pulling off High NA EUV for 2025. Maybe someone will say that Intel is likely to hit their milestones and will regain the title of best-fab. However, given that AMD hasn't been able to really hammer Intel's marketshare, it feels like Intel has more staying power than I'd think. Again, like the parent comment, it's always puzzled me that AMD hasn't gained a ton of marketshare over the past 5 years.

treprinum 2y ago
All these points about Intel are just waiting for an answer to "Is Intel capable of changing its prevailing culture or not?". There is a reason why Intel fell behind and it wasn't due to a lack of engineering geniuses inside. You might bet on the stock market and see. AMD obviously has a SPOF in TSMC and its limited capacity.
- mdasen 2y ago
  Yep, that's a lot of the essence. I would point out a few things, though. Unlike many other cases of a company getting a bad culture, Intel hasn't seen its marketshare destroyed. They still have time to turn things around. Even if things go in a very bad direction, they could become a fabless company like AMD and compete for TSMC's capacity on equal terms with AMD. If you look at a company like Yahoo, Google had already become dominant when it was trying to turn itself around. AMD hasn't even hit a third of the market. Not only that, but it's probable that AMD isn't capable of becoming even 50% of the market due to capacity constraints. If AMD can make 25-30% of the market's processors and no more due to capacity constraints, even if Intel processors are inferior, they're still going to be the bulk of sales. By contrast, Google had basically infinite capacity to dominate search, Facebook had basically infinite capacity to crowd out MySpace and other rivals, etc. The point is that Intel has a lot more runway to turn itself around if it's essentially guaranteed 70% of the market. In some ways, this resembles the Boeing/Airbus situation. While Boeing has been in a bad place recently, Airbus can't take advantage of it. That gives Boeing a long time to change its trajectory and is probably why Airbus is only worth around 15% more than Boeing. Even if airlines want to buy Airbus planes, they can't. Likewise, even if OEMs and datacenters want to buy AMD chips, maybe they can't because AMD doesn't have the capacity to make them. In some cases, you need to rapidly change the culture and direction of a company because you're quickly dying. In Intel's case, it seems likely that they could waddle along for a long time if AMD isn't able to quickly grab marketshare. I think it's easier to gradually change the culture over a longer period of time if you have the ability to stave off collapse in the meantime. For example, maybe we'll look back on Intel in a decade and say "yea, the change started around 2020 when Intel realized it had fallen behind. It continued to fall behind while it tried to correct things, but then turned a corner and in 2025 they'd regained the fab crown." Are we already close to that culture change showing up in the public view? I just think I don't know enough about the industry to really know. Maybe someone would say "Intel has already done the culture change and we've seen that in things like Intel 4 and you're really going to notice it in 2025 and 2026 with Intel beating TSMC to High NA EUV." Maybe someone would say "No, intel hasn't changed its culture and you can see that Intel 4 is a niche where they can't even make enough volume to put out a server product with it." Or maybe Intel is focused on the more medium-term with 18A and not wanting to waste resources on a less-than-stellar interim process. I guess my question isn't just whether Intel is capable of changing its culture, but whether that's already happened. The public perception is a lagging indicator. Most of the public didn't have a bad perception of Boeing 1996-2017. We only recognized the problems in hindsight. Likewise, we recognized Intel's shortcomings in hindsight. We won't recognize whether Intel has changed for years after it has already changed. So, has Intel's culture already changed (and we're going to see some pretty awesome stuff from them in 2025 and 2026) or has Intel been on the same path to mediocrity for the past 4 years (and they've just gotten better at press releases announcing that they'll be better soon)?

by mdasen 2y ago

treprinum 2y ago

All these points about Intel are just waiting for an answer to "Is Intel capable of changing its prevailing culture or not?". There is a reason why Intel fell behind and it wasn't due to a lack of engineering geniuses inside. You might bet on the stock market and see. AMD obviously has a SPOF in TSMC and its limited capacity.

mdasen 2y ago
Yep, that's a lot of the essence. I would point out a few things, though. Unlike many other cases of a company getting a bad culture, Intel hasn't seen its marketshare destroyed. They still have time to turn things around. Even if things go in a very bad direction, they could become a fabless company like AMD and compete for TSMC's capacity on equal terms with AMD. If you look at a company like Yahoo, Google had already become dominant when it was trying to turn itself around. AMD hasn't even hit a third of the market. Not only that, but it's probable that AMD isn't capable of becoming even 50% of the market due to capacity constraints. If AMD can make 25-30% of the market's processors and no more due to capacity constraints, even if Intel processors are inferior, they're still going to be the bulk of sales. By contrast, Google had basically infinite capacity to dominate search, Facebook had basically infinite capacity to crowd out MySpace and other rivals, etc. The point is that Intel has a lot more runway to turn itself around if it's essentially guaranteed 70% of the market. In some ways, this resembles the Boeing/Airbus situation. While Boeing has been in a bad place recently, Airbus can't take advantage of it. That gives Boeing a long time to change its trajectory and is probably why Airbus is only worth around 15% more than Boeing. Even if airlines want to buy Airbus planes, they can't. Likewise, even if OEMs and datacenters want to buy AMD chips, maybe they can't because AMD doesn't have the capacity to make them. In some cases, you need to rapidly change the culture and direction of a company because you're quickly dying. In Intel's case, it seems likely that they could waddle along for a long time if AMD isn't able to quickly grab marketshare. I think it's easier to gradually change the culture over a longer period of time if you have the ability to stave off collapse in the meantime. For example, maybe we'll look back on Intel in a decade and say "yea, the change started around 2020 when Intel realized it had fallen behind. It continued to fall behind while it tried to correct things, but then turned a corner and in 2025 they'd regained the fab crown." Are we already close to that culture change showing up in the public view? I just think I don't know enough about the industry to really know. Maybe someone would say "Intel has already done the culture change and we've seen that in things like Intel 4 and you're really going to notice it in 2025 and 2026 with Intel beating TSMC to High NA EUV." Maybe someone would say "No, intel hasn't changed its culture and you can see that Intel 4 is a niche where they can't even make enough volume to put out a server product with it." Or maybe Intel is focused on the more medium-term with 18A and not wanting to waste resources on a less-than-stellar interim process. I guess my question isn't just whether Intel is capable of changing its culture, but whether that's already happened. The public perception is a lagging indicator. Most of the public didn't have a bad perception of Boeing 1996-2017. We only recognized the problems in hindsight. Likewise, we recognized Intel's shortcomings in hindsight. We won't recognize whether Intel has changed for years after it has already changed. So, has Intel's culture already changed (and we're going to see some pretty awesome stuff from them in 2025 and 2026) or has Intel been on the same path to mediocrity for the past 4 years (and they've just gotten better at press releases announcing that they'll be better soon)?