Author/ Author of "Finance and Economics" Weekly Zeng Guang
Editor/ Dong Yuqing
The global semiconductor market is hot, as the most competitive semiconductor giant, Intel is still not out of the predicament.
From 2014 to 2021, the core series of chips has been continuously polishing the 14nm process for seven years, but it has also become Intel's lost seven years. During this period, Intel changed from a leader in the chip process to a catch-up, not only being overtaken by TSMC and Samsung, but even its old friend Apple also made a splash with the M1 Ultra chip at the spring 2022 press conference and became an opponent.
The struggling Intel was ridiculed by netizens as a "toothpaste factory" because its progress was as small as squeezing toothpaste.
In January 2021, Intel finally saw a little light. New CEO Pat Gelsinger took office, and under the leadership of this full-fledged technology giant, the Core series of chips finally ushered in the first real innovation in 7 years - the first use of 10nm process, accompanied by a huge shift in Intel's long-term strategy, Intel has formulated an ambitious revival plan to try to get back to the top.
It's been 450 days since Pat Kissinger took office, and during those 450 days he's radically overhauled Intel and invested heavily in research and development, announcing that he will regain the catch-up of advanced processes by 2024.
However, in the context of the entire electronics consumer market falling into a downturn in 2022 and major terminal manufacturers have cut orders, this road may not be so easy to go, and the pressure is unprecedented.
Radical reforms, plans to invest more than $200 billion
The current Intel CEO, Pat Kissinger, is an Intel veteran who spent 30 years at Intel. On January 13, 2021, Kissinger succeeded Robert Swann as Intel's eighth CEO.
In fact, Kissinger is 60 years old, and he became Intel's first CTO (Chief Technology Officer) in 2000, when he was an alternate for Intel's CEO. But in 2009, Kissinger left Intel and served as COO (Chief Operating Officer) and CEO at EMC and VMware.
The arrival of Kissinger means that Intel has returned to the technical route and begun to pursue the leading chip process again. His predecessor, Robert Swann, was a full-fledged financial manager with no technical background, and the mass production of the 10nm process was postponed several times during his tenure, and he was ousted as Intel's CEO for less than three years, becoming the shortest-serving CEO in Intel's history.
Intel shares rose 13 percent after the news of Kissinger's return to take the helm of Intel was announced, and Intel Chairman Omar Ishrak said in a statement: "After careful consideration, the Board concluded that now is the right time to use Pat's technical and engineering expertise to change leadership during a critical period of Intel's transformation." ”
After 12 years of returning to Intel, Kissinger's old owner is no longer the former hegemon, TSMC, Samsung, AMD (Chaowei Semiconductor Co., Ltd.) and other semiconductor manufacturers are threatening Intel's position from the fields of design, foundry and other fields, and even Qualcomm, which focuses on mobile processors, is also trying to get involved in desktop processors.
In order to reinvigorate Intel's glory, Kissinger has implemented a number of strategic innovations since taking office, completely subverting the integrated defense line of design, manufacturing, packaging and testing built by Intel in the past few decades, and launching a new IDM 2.0 strategy as a replacement.
The semiconductor industry is generally divided into three models, namely IDM, Fabless and Foundry, of which IDM refers to the whole industry chain model, from design, manufacturing, packaging and testing to sales are all handled by a manufacturer, Intel is one of the representative manufacturers; Fabless refers to the factory-free model, chip brands only do chip design and sales, do not involve production links, representative manufacturers have Qualcomm, MediaTek, Huawei HiSilicon; Foundry refers to the foundry model, Manufacturers focus on chip production, not responsible for chip design, on behalf of manufacturers are TSMC, SMIC.
IDM's "I want it all" model was once seen as a key strategy for Intel's rise, with its self-developed capabilities from design to packaging and testing and multiple wafer manufacturers around the world, the IDM model has built a very high competitive barrier for Intel. However, with the relative decline of Intel in the past seven or eight years, as well as the refinement of the division of labor in the semiconductor industry, the rise of upstream and downstream giants in the industrial chain such as TSMC and AMD, the IDM model has begun to be criticized by some insiders, and the Fabless and Foundry models are now more respected.
Today, Kissinger's IDM 2.0 strategy is a further iteration of the IDM model. This model means that Intel is not ready to give up chip manufacturing, but at the same time it is trying to seek external foundry, while opening up its own foundry capabilities, no longer limited to design, manufacturing, packaging and testing and other aspects of the one-hand package.
"Intel's IDM 2.0 is a matter of course, IDM is written into the genes in the bone marrow of Intel, he will definitely insist on self-development and self-production, but at the same time its production capacity can be open to other customers who need it, which is equivalent to sharing a part of the research and development risk." Wang Xiaolong, research director of Xinmou, mentioned idM2.0 to the financial world weekly.
Specifically, under the new strategic system, Intel will increase investment in advanced process processes on the one hand, and seek external capacity and open foundry on the other hand.
In terms of catching up with advanced process processes, Intel's main strategy is to build more wafer foundries and increase investment in advanced processes. In January this year, Intel successfully snapped up asma (ASML)'s latest NA0.55 lithography machine before TSMC, locking in a new generation of process technology on the basis of hardware.
In March 2021, Kissinger announced that it would build two new fabs in Arizona, scheduled to begin construction in September 2021, with the two plants expected to open in 2024. In January 2022, Intel again announced a plan to invest more than $20 billion in an initial investment to build two new large-scale fabs in Ohio, which Kissinger mentioned are expected to be operational by the end of 2025.
At the press conference announcing the Ohio fab investment plan, Kissinger also mentioned that if it can be supported by the Chip Act subsidies under consideration, Intel's investment plan in Ohio may increase to $100 billion in the next decade, and up to 8 new fabs can be built.
Just last month (March 2022), Intel just announced the first 33 billion euros of investment in Europe, of which it will focus on investing 17 billion euros in Germany, building two semiconductor fabs, trying to produce chips below 2nm, and is expected to achieve mass production in 2027.
Large-scale fab expansion plans have been introduced, reflecting Intel's determination to return to the world's first place in chip manufacturing. The data compiled by The Weekly Magazine found that intel's currently announced future investment plans may have exceeded $220 billion, and some of the fabs have begun to be selected.
(Financial World Weekly Mapping)
However, unlike before, in the future, Intel's fab will no longer be limited to OEM for its own products, but also undertake chip OEM business. This model is closer to another semiconductor giant Samsung, Samsung Electronics in addition to the production of its own chips, but also to undertake chip OEM, the latest generation of Qualcomm Snapdragon 8 chip is from Samsung FOUNDRY.
In order to better enter the foundry field, on February 15, 2022, Intel acquired The Israeli semiconductor foundry Tower for $5.4 billion, which is one of the top ten semiconductor foundries in the world. Intel announced that the transaction will be completed in about 12 months, and if the transaction is successfully completed, Intel, which has never been involved in foundry before, will become one of the top ten wafer foundries in the world.
In addition to entering the foundry industry, Intel has also begun to actively embrace external foundry, and will hand over part of the production line of TSMC's own processors from 2023. In December 2021, Kissinger even visited Taiwan to discuss oem 3nm chips with TSMC executives.
Overall, IDM2.0 does not mean that Intel abandons self-development and self-production, but more like some form of "opening up", on the one hand, this allows Intel's own fabs to face the competition in the foundry market and accelerate the iteration of the process process; on the other hand, intel's chip design no longer needs to wait for the slow progress of its own process, and has the opportunity to use TSMC and Samsung's more advanced process technology in advance.
In addition to investing heavily in factories, Intel also continues to maintain a high level of R&D investment. In 2020, Intel spent $12.9 billion on R&D, accounting for 19% of the entire semiconductor industry, and in the first nine months of 2021, Intel invested $11.1 billion in R&D, an increase of 12.5% year-on-year. In addition, Intel is preparing to begin licensing the X86 architecture to other semiconductor manufacturers to deal with the problem of a large number of users flowing to the ARM architecture.
The three fires of the new official, kissinger's three fires, have been burning for 450 days, and now it is time to test the effectiveness of the first stage. From investing in factories, entering the foundry, increasing R&D expenditure to opening up the ecosystem, under the new IDM2.0 strategy, Pat Kissinger completely opened Intel's closed empire siege, but when TSMC directly entered the siege of Intel's self-developed and self-produced siege, would this be the right choice?
Internal and external troubles, AMD apples back and forth pinch
Pat Kissinger's radical reforms have good reasons.
In the past few years, Intel is facing the dilemma of being caught between amD, TSMC, Apple and other upstream and downstream manufacturers, and the high-growth emerging giants continue to threaten Intel's hegemony.
In January 2022, Intel released its full-year 2021 financial report, which showed that its annual revenue was $74.7 billion, an increase of only 2% year-on-year, of which the main business segment CCG (Client Computing Division) had annual revenue of $40.5 billion, a slight increase of 1% year-on-year.
Another semiconductor giant, Samsung, released its earnings report at almost the same time, and the financial report showed that Samsung Electronics revenue in 2021 increased by 29% year-on-year to 78.29 billion yuan, surpassing Intel to become the world's largest semiconductor manufacturer, which is the third time in recent years that Samsung's revenue has surpassed Intel.
In 2017, Samsung surpassed Intel for the first time to become the world's number one semiconductor giant with a revenue of $61.22 billion, followed by Samsung's first position in the semiconductor industry revenue with $75.85 billion in 2018. But in 2019 and 2020, due to the impact of the decline in memory chip prices, Samsung's revenue plummeted, and Intel once again surpassed Samsung to become the world's first.
In addition to Samsung, AMD, Intel's old rival in the CPU field, has also grown rapidly in recent years. In 2021, AMD's full-year revenue was $16.434 billion, a significant increase of 68% year-on-year, and the market expects AMD revenue to reach $215 in 2022, an increase of about 31% year-on-year.
Although there is still a big gap with Intel's volume, AMD's performance has grown for 7 consecutive quarters, and AMD expects revenue to continue to climb in the first quarter of 2022, reaching $5 billion, an increase of 45% year-on-year.
On February 14, 2022, AMD completed its acquisition of semiconductor maker Xilinx for $49 billion. Affected by the news, ON February 15, AMD's stock price rose sharply, and its market value exceeded $197.75 billion, exceeding Intel's market value for the first time in history. Although this short-lived overtaking lasted only one day, considering that AMD's overall revenue last year was only 22% of Intel's, this in itself represents the recognition of AMD by the capital market.
The most important area of Intel and AMD confrontation is mobile and desktop processors, that is, CPU core processors on notebook computers and desktop computers, of which Intel's product line in this area is the Core series, and AMD's product line in this field is the Ryzen series. Intel's market share in desktop processors (desktop CPUs) and mobile processors (notebook CPUs) was 83.8% and 78.4%, respectively, in the fourth quarter of 2021, compared to 16.2% and 21.6% for AMD.
From the fourth quarter of 2021 to the first quarter of 2022, Intel's 12th generation Core series processors have been released, and in the past two months, laptops equipped with these latest chips are being intensively listed. In February, game books equipped with 12-generation Core processors began to be released, and from March 24, thin and light books equipped with 12-generation Core processors were also on the market.
When the 12th generation Core chip was first launched in October 2021, Intel mentioned that this chip was the biggest change since 2015. Although Intel claims that its Core chips are the new generation every year, it has been polishing its 14nm process for a long time, and the 12th generation Core is Intel's first mobile processor that no longer continues to use the 14nm process.
Photo/Visual China
Shortly after the release of the 12th-generation Core processor, on January 5, 2022, AMD also held an online conference to officially launch the new generation of desktop processors Ryzen™ 6000 series and AMD Radeon graphics cards. Compared with the 12th generation core, the new generation of Ryzen 6000 series adopts TSMC's 6nm EUV process, and the process is more advanced.
"In terms of process technology, it is indeed TSMC's strength now, so AMD's chips have surpassed Intel in many performance indicators, and the market share has also greatly improved." Wang Xiaolong told Caijing Tianxia Weekly.
However, the chip process itself does not fully represent the performance of the processor, CPU performance is also related to a variety of factors such as transistor density, from the current data of the evaluation media, the overall performance of the 12th generation Core chip is still stronger than the Ryzen 6000 series.
And compared with the very comprehensive product line of Core chips, the Ryzen series chip model is still relatively single, mainly divided into the "Ryzen 6000H series" for game performance and the "Ryzen 6000U series" for thin and portable, and the market share of Ryzen™s chips is still far lower than Intel's Core. As of now, laptops equipped with a new generation of Ryzen™ chips have not yet been introduced to the market.
Although the overall performance is not as good as Core, the product line is not rich enough, but in the past four or five years, the Ryzen series of chips has indeed been constantly threatening the status of Core, more and more notebooks choose to carry Ryzen processors, "AMD YES" has become a popular word among digital enthusiasts.
However, according to the "Finance world" weekly understanding, the main advantage of the current Ryzen series of chips is still at a low price, most consumers choose Ryzen™ chips mainly for cost-effective considerations, if it is the same price level, Core chips are still the first choice of most consumers.
In addition to desktop-level processors, in the field of server chips, AMD is also encroaching on Intel's market. In the fourth quarter of 2021, AMD's market share in the server chip field reached 10.7%, a three-fold increase from 3.6% a year ago, while Intel's market share in this field was as high as 99%. However, compared with the consumer market, the server market is more dependent on ecology, and Intel is still the absolute king in this field.
"The server is mainly To B (to the enterprise), the desktop processor is mainly To C (for individuals), Intel has established a very strong ecosystem in the server field in the past, and it is difficult for enterprises to change it, and the server is such a thing, even if the process is a little backward, through the area and quantity stacking, can also achieve the same computing power, the problem is not very big." Wang Xiaolong said to the weekly "Finance and Economics" weekly.
In addition to AMD, Apple's self-developed chips are also further threatening Intel's position. In March 2022, Apple unveiled the M1 Ultra, its latest desktop-grade processor at its spring conference, positioned as a high-performance desktop processor.
Losing Apple, a big customer, is probably Intel's biggest failure in the past few years. Due to the slow iteration of Intel's process process, Apple is determined to adopt its self-developed M series chips on its Mac series of computers (desktops and notebooks).
As early as the autumn of 2020, when Apple released the M1 chip, Apple announced the beginning of its two-year transition period, saying that it would convert all Mac series computers to M series self-developed chips by 2023. From the M1, M1 Pro, M1 Max to M1 Ultra, Apple is rapidly refining the product layout of its desktop processors in preparation for the complete elimination of Core processors in the future.
According to foreign media DigiTimes reported in 2021, as Apple gradually replaces Intel chips, by 2023, Intel may lose about 10% of its market share, making its overall market share fall below 80%, of which Intel may lose 50% of Apple orders in 2021, and may not get any orders from Apple after 2022.
From the perspective of market share, Intel is still the former twilight overlord, but the upstream has AMD, Apple, downstream TSMC, Samsung, in 2022 Intel is facing a back and forth attack, and the effect of Kissinger's reform may not be tested in the next few years.
Anxious war
While Intel is promoting change, competitors are not idle, and various friends are also increasing the more advanced process, and from the currently disclosed plans, the launch time of the same process is earlier than Intel.
Specifically, TSMC expects to mass-produce the 3nm process in the second half of 2022 and achieve mass production of the 2nm process in 2025; Samsung expects to start mass production of the first batch of 3nm processes in the first half of 2022, mass production of the second generation of 3nm processes in 2023, and launch of 2nm processes in 2025.
While friends are moving towards the 3nm and 2nm processes, Intel expects to mass-produce intel 4 processes (equivalent to 7nm) in the second half of 2022, Intel 3 (equivalent to 7nm+) in the second half of 2023, and Intel 20A (equivalent to 5nm) in the first half of 2024.
However, some industry views believe that the way TSMC and Samsung name the chip process is not rigorous, and there is a certain amount of moisture. For example, Intel's previous 10nm process is considered to be equivalent to TSMC's 7nm process, and the 5nm process under Intel's standards can be compared to TSMC's 3nm process.
Through investment in advanced processes in the coming years, Intel expects to begin introducing High-Na UV in 2024 to support more advanced 18A processes, enabling process overtaking. Although from the naming point of view, the 18A process is only equivalent to 5nm+, but the industry generally believes that Intel's 5nm+ can be compared with the TSMC 2nm process.
But even considering that Intel's standards are more stringent, Intel's process is still lagging behind TSMC.
"Even if Intel can compare with TSMC's leading generation of technology, it is certainly not comparable to two generations ahead." Intel can mass-produce 14nm at most equivalent to TSMC's 10nm, but certainly not as good as TSMC's 7nm, and now TSMC's 5nm are mature for mass production for a year, Intel 10nm is mass production. Wang Xiaolong said.
And judging from this year's market situation, the prospect of Intel's large-scale expansion may not be so optimistic. Recently, PC supply chain news said that most notebook manufacturers have cut the shipment target in the first half of 2022 by a lot, and some brands have cut by up to 50%. Some insiders mentioned that brand suppliers have cut shipment targets, which may mean that the notebook market has entered a downturn. Citibank reiterated Intel's "neutral" rating in February, and Citi analyst Christopher Danely noted that laptop shipments in January 2022 fell 24% month-on-month, higher than the 16% decline previously expected.
The reasons for the shrinkage of the notebook market are complex, and the industry generally believes that it is related to factors such as the decline in demand caused by the epidemic, the saturation of the consumer market, and the global inflation brought about by the Russo-Ukrainian war. In addition to the laptop market, the mobile phone market has also faced a contraction in demand in the past two months.
In recent days, Kissinger has been intensively visiting its customers in Japan, Taiwan and other places. On April 8, according to foreign media reports, Kissinger visited TSMC again to seek TSMC's production capacity support. According to the report, Kissinger is not only seeking advanced production capacity of 7nm and below, but also seeking capacity support for 28nm and other mature processes.
On April 28, Intel will release its first quarter 2022 earnings report. According to Intel's previous forecasts, its revenue in the quarter was about $18.3 billion, which may usher in a month-on-quarter and year-on-year decline. Intel's revenue was $19.7 billion in the year-ago quarter, compared to $20.5 billion in the previous quarter (both U.S. GAAP).
At the same time as the revenue probability of falling in the first quarter, the Wall Street Journal reported on April 6 that Kissinger received a total of $180 million in ultra-high portfolio compensation in his first year at the helm of Intel, about 7 times more than former CEO Shreb and higher than Apple CEO Cook.
Declining incomes and sky-high salaries are all pressures on Kissinger's shoulders. For Kissinger, the road ahead of taking the helm of the world's largest semiconductor giant remains elusive, but after 450 days in office, it is time for him to prove his worth.
This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.