Retired!
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Is this news good, bad or neutral?
Ok, so perhaps somewhat bad news for AMD longer term, if Gelsinger is replaced with someone who does a better job righting Intel’s ship!
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Intel lost its mojo many years ago. I think the antitrust issues and settlement and Intel’s following the law thereafter may have been a bigger factor than I realized. Alan81 knows what’s going on inside Intel far better than I ever did, and I’m no longer following semiconductors closely as part of my day job (computer games) as I’m retired.
Regardless, as eachus likes to say, building new chips is like playing Russian roulette with your company and finding out five years later if you survived. I am not sure there was a fix Gelsinger could have enacted in less than a decade. As soon as Intel started buying wafers from TSMC, I thought they were dooming themselves to higher cost of good forever, and thus worse margins. Intel needed great minds working on process all the time, and once they ceded the process crown to TSMC they’d voluntarily cut their margins forever so it’s not clear Gelsinger could ever return Intel to its glory days of having the best processes and using its monopoly to keep competition down.
Intel also had a history of milking its customers. All of them needed AMD as a check on Intel just doubling its prices, and many of them would use non-Intel chips if possible. These days, with more ways to build powerful computers, Intel is facing architecture competition from many directions. So Intel’s doldrums may have been too much short term profits over long term success 20 years ago, and the pigeons have come home to roost.
One other thing IMO is knowable from todays INTC price movement. Gelsinger’s new hit and there was a huge immediate spike as I think less educated investors thought with their wallets instead of their minds. And better educated investors took their quick 10% profits and five hours later Intel is in the red. Gelsinger is not THE problem. It’s not clear he was THE solution, which is why he’s gone. He was a pretty obvious choice to try and fix the problems Intel was having. We may never know if he could have turned things around. Companies in this era can no longer tell the truth, e.g. “We think the anti-monopolistic behavior the courts have ruled we did and we have stopped doing may affect our long term margins.” That reset of expectations would make Intel’s last decade look better, but would be an open invitation for shareholders to sue Intel.
Intel is still hugely relevant with an enormous installed base. f they drop under $20 again, I may buy some, not in expectation of huge returns, but as a hedge against what I think our economy may do. But I may not. Intel’s stock price has a LOT of splits diluting shares in it. I’d be betting on the world’s needs for medium power computers keeping Intel relevant. I think Chromebooks/tablets are now really the low end. But as Intel’s prospects on the high end do not make me think they will ever look good compared to Intel of 20 years ago, and Intel faces price limits as tablets improve, Intel will face a lot of challenges. Buy low and sell high is still the core principle of investing.
I don’t think using TSMC tactically meant a forever surrender on fabs and margins, though it wasn’t a good sign that they felt they had to do it.
The whole point of the push to get 18A process up and running with good yields, performance etc. was to turn the ship while using TSMC to buy time for a generation or so. I think he bet the company on that and so far it hasn’t proven out; killing 20A was probably the right thing to do, taking learnings from that to go to 18A since no real customers for 20A emerged. If 18A gets to good yields even six months or worst case a year late it will still be relevant. Samsung is just floundering with yields, and there are no other players to speak of…
For me the bigger flub where TSMC was concerned was Gelsinger badmouthing Taiwan’s political/military vulnerability, insulting TSMC and getting a 40% discount on wafers revoked. Words that careless from a CEO cost billions for no good reason, basically leading to near-zero margins for anything made at TSMC.
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Reuters dive into the story is really pretty good. Lots of over-promising and under/mis-delivering.
The bet on which Gelsinger staked Intel’s future came less than two months into his tenure: a global foundry that could vie with TSMC. In March 2021, he promised to invest $20 billion in two Arizona factories. That July, he said Intel also would develop five manufacturing processes in four years. Among them was 18A, a bundle of technologies under development that he hoped would restore Intel’s manufacturing excellence.
Gelsinger pushed for Congress to subsidize American chip manufacturing. In January 2022, he stood with Biden to announce another $20 billion for two factories in Ohio. Gelsinger told Reuters at the time that Intel’s commitment in the state might reach $100 billion to create “the largest semiconductor manufacturing location on the planet.”
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Gelsinger was optimistic with clients, too. He oversaw a deal to build custom chips for Alphabet’s growing fleet of Waymo self-driving taxis, set to roll out across the U.S., three people familiar with the previously unreported plans told Reuters. Gelsinger personally discussed the deal with Sundar Pichai, Alphabet’s CEO, two of the people said.But after Intel’s outlook worsened in 2022, the company canceled the Waymo deal, the two people said, and paid a fee to Alphabet after Alphabet threatened legal action.
Sandra Rivera, who formerly ran Intel’s data center group and is now CEO of Intel-owned Altera, said in an interview that her team cut the Waymo project after a corporate reorganization required her to make “decisions about the entire portfolio.”
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At times, Gelsinger has told leaders at major clients that Intel could furnish alternatives to Nvidia’s GPUs, said three people familiar with the talks – including for Microsoft and Amazon Web Services, two of them said. When customers sought details, Intel managers had little to show and some deals didn’t happen, the sources said.
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Some customers have been disappointed by what they’ve seen of 18A.When one big prospect, chip and software company Broadcom (AVGO.O), opens new tab, sent foot-wide wafers through Intel’s 18A process, the process was not ready for high-volume production for external customers, Reuters reported in September. No more than 20% of the chips printed via 18A passed Broadcom’s early tests, two people briefed on the results said. That is low compared to TSMC’s early-stage yields.
Broadcom told Reuters it has “not concluded” its evaluation of whether to use Intel’s foundry.
On the day of the Reuters report in September, Intel issued a statement saying it was on track to launch 18A in 2025 and had released tools for partners and customers to plan chips for the process.
A recent planning document produced by an Intel supplier indicates delays, however. The document, seen by Reuters, noted the supplier is still waiting to receive another digital design kit it needs to push ahead. It also lacked access to Intel factories, a person with knowledge of the situation said. Customers have little prospect of making chips in high volume with the 18A process until 2026, two people said.
Apple (AAPL.O), opens new tab and Qualcomm (QCOM.O), opens new tab, among other potential clients, have passed on 18A for technical reasons, three people with knowledge of their decisions said. Both companies declined to comment.