Intel is again "paranoid"

On April 18, Intel announced the end of life of its first-generation Blockscale 1000 series chips, while not announcing a successor to the series. Intel responded that the move was to prioritize investment in IDM 2.0 while Intel will continue to support its Blockscale customers.

This action once again shows that in the face of weak market demand, the troubled US semiconductor giant Intel has to find ways to open source and reduce costs and reverse its loss-making financial situation. Just days before announcing the end of the Blockscale series, Intel decided to withdraw from the Data Center Solutions Group (DSG) and sell it to Taiwanese MiTAC computers, and Intel gave the same reason for selling the server business in order to "prioritize investment in its IDM 2.0 strategy."

Andy Grove, one of Intel's founders, once pointed out in the book "Only Paranoia Can Survive" that there will be a strategic turning point in the development of enterprises, and this time enterprises will have the opportunity to rise to new heights. So will IDM 2.0 be the strategy to make Intel Great Again?

01

Intel's "Clues" of Business Adjustment

Before Pat Kissinger took office in 2021, Intel's development direction under the leadership of former CEO Stephen was a multi-architecture XPU company, and now Kissinger's series of actions are clearly changing Intel's course.

Intel's restructuring

In late 2022, Intel announced the retirement of its Accelerated Computing Systems and Graphics Group (AXG), once one of its six main divisions. At that time, Intel merged the consumer graphics division in the original AXG with Intel's Customer Computing Group (CCG), adding the accelerated computing team to its Data Center and Artificial Intelligence Business Unit (DCAI). AXG's three main businesses include the Visual Computing Group (Intel's GPUs for gaming, content creation, and meta-applications), the Supercomputing Group (processors for high-performance computing, artificial intelligence, and media processing), and the Custom Computing Group (custom chips for blockchain, edge supercomputing, and more). In February 2022, the AXG division had planned to bring in more than $1 billion in revenue in 2022; By 2026, AXG's three major businesses will generate nearly $10 billion in revenue for Intel. In December of the same year, AXG was split, and at that time some media believed that Intel wanted to accelerate the business of discrete graphics and accelerated computing through architectural changes. However, it should be remembered that since AXG's inception, the division has lost more than $2 billion, perhaps because some businesses have ceased to "generate electricity for love".

In 2023, Intel announced that it will transfer 5G baseband technology related to the notebook business to two Chinese companies, chip manufacturer MediaTek and module manufacturer Guanghetong. The plan is expected to be completed by the end of May, and Intel will completely exit the 5G baseband market by the end of July. In response to the end of this business, Intel's response is still "to continue to prioritize investment in the IDM 2.0 strategy."

Back to the DSG business that Intel cut this time. DSG was originally a "model house" product made by Intel for OEMs and ODMs, and Intel can develop standards for the next generation of products through the DSG department. Relatively speaking, Intel's server products are relatively complete, and the customers of product positioning are mainly large manufacturers that prefer high-end applications, such as EMC, Oracle, and ASML. Intel has equipped its server business with a hardware design, development, testing, and driver team of more than 2,000 people, trying to give its "high-end customers" the best experience, but at the same time, this also means that the cost of the product is very high, because the corresponding product line is relatively short, so it is not very strange to be cut in the open source throttling environment.

02

All for IDM 2.0

Looking back, Intel's architecture adjustments in the past two years are closely related to IDM 2.0. In early 2021, Intel announced the revitalization of its chip foundry manufacturing business and renamed it "Intel Foundry Services" (IFS), with the goal of attracting customers such as Apple and Nvidia. For the IDM 2.0 strategy, Intel is not only investing tens of billions of dollars in the United States, but also expanding its foundry product portfolio through the acquisition of wafer manufacturing companies such as Tower Semiconductor in areas such as RF, displays, and power management chips.

So what happened to IDM 2.0?

In mid-April, Intel IFS and Arm announced the signing of a multi-generational, leading-edge system-on-chip design. The agreement is designed to enable chip design companies to leverage the Intel 18A process to develop low-power computing system-on-chips (SoCs). Intel 18A offers two major breakthrough technologies, PowerVia for optimized power transfer and RibbonFET surround gate (GAA) transistor architecture for optimized performance and power consumption. The technology can optimize the power consumption of chips, improve performance, and increase the capacity of Intel's chip foundries in the United States and the European Union. The collaboration will initially focus on mobile SoC design, with future expansion into automotive, IoT, data center, aerospace and government applications.

As a semiconductor giant, Intel's partners are always the best in the industry. Beginning in 1978, Intel President Andy Grove and Microsoft President Bill Gates teamed up to form the most profitable business alliance the United States has ever seen. In 1986, IBM lost control of personal computers because they were reluctant to adopt Intel's 386 microprocessor. At that time, Compaq, which used the Intel 386 microprocessor, broke into personal PCs and rose rapidly. In the past 20 years, Intel and Microsoft have won the supremacy of the personal computer industry from the world-dominating Apple computer and IBM through new business cooperation methods of competition and complementarity.

In July 2022, Intel announced a chip foundry agreement with MediaTek. Under the agreement, MediaTek will use Intel's process technology to manufacture multiple chips required for a range of intelligent edge devices, while Intel's foundry services division will provide a wide range of manufacturing platforms. With Intel's announcement of cooperation with Arm, the industry has reported that Arm may develop its own mobile phone chips.

Can the mobile processor market make IDM 2.0 prosper? The answer will take some time.

03

Intel has identified a choice

The strategy identified by Intel is not only IDM 2.0. Not long ago, Pat Kissinger said in Beijing that Intel China is Intel's strategic priority. Intel has been rooted in China for nearly 40 years, and China is Intel's largest sales location outside the United States, with revenue reaching $17.125 billion in 2022, accounting for 27% of total global revenue.

On April 8, 2023, the opening ceremony of Intel's Sanya office was successfully held in the Sanya Central Business District, marking the launch of Intel's Hainan business. The newly established Intel Integrated Circuits (Hainan) Co., Ltd., as a wholly-owned subsidiary of Intel in the Hainan Free Trade Port, will provide cross-border software and hardware product distribution and settlement, software design and licensing, system integration, and talent training related services to the Chinese market, and engage in equity investment activities for domestic start-ups.

In addition to building the company, Intel also plans to launch chips that meet U.S. export specifications. Intel confirmed that it will adjust its data center GPU family, cutting the Max GPU 1350, which is expected to launch later this year, and reduce the I/O bandwidth to meet the needs of "different markets." This means that after NVIDIA, Intel is expected to follow up with the launch of China-specific GPUs.

As the first CEO of the Big Three to visit China, Pat Kissinger also received meetings with a number of Chinese government officials. Developing the Chinese market is still Intel's definitive choice. The results of IDM 2.0 may not be seen for a few years, but the results of choosing the Chinese market should be visible soon.

04

Write at the end

Andy. In his book, Grove discusses whether the Internet is a threat to Intel, because if the software used on the Internet is compatible with any model of microprocessor, Intel will have to face competition from all sides.

At the time, some in the industry were already touting cheap "Internet Appliances," and some at Intel argued that these simplified computers could rely on large, centralized computers elsewhere on the Internet to store and assemble data and deliver the software and data they needed to computer users at any time. This would make it possible to manipulate mainframe computers behind their backs, and users of computers would no longer need to have the knowledge of computing (which later evolved into mobile phones). Then simple and cheap chips can be used in such Internet devices, and this will affect Intel's business.

Andy. Grove judged in this threat that the advent of the Internet gave computers a third use, allowing more people to use PCs, and Intel targeted the personal PC market. "In the short term, the development of the Internet is likely to be a threat; But in the long run, data including pictures, audio and video will make the Internet more widely available, and new business opportunities will follow. ”

At present, Intel may also be standing at such a fork in the road, IDM 2.0 is paranoid or wise? In a certain context, paranoia is an insistence, and persistence can make history.

Where will Intel go amid the ups and downs of the semiconductor industry?