> Since its founding in 1968 Intel has been synonymous with shrinkage. In its first four decades this was high praise. Every two years or so the American chip pioneer came out with new transistors half the size of earlier ones, a regularity that came to be known as Moore’s law, after one of the company’s founders. Twice as many chips thus fit onto roughly the same silicon wafer—and could be sold profitably for roughly the same price. That allowed Intel to corner the market for memory chips and then, when “memories” became commoditised in the 1980s, for the microprocessors which powered the subsequent pc revolution.
> Nowadays when “Intel” and “shrinking” are uttered in the same breath it is no longer a compliment. After two sets of disastrous quarterly earnings the company’s market value has shrivelled to $84bn, less than the value of its plants and equipment, from over $210bn in January. The artificial-intelligence (ai) boom’s voracious appetite for silicon has propelled other chip firms, but Intel’s shares have seldom been this cheap since the late 1990s. It may be about to be booted out of the Dow Jones Industrial Average, possibly in favour of Nvidia, the champion of ai chips.
> In early August Pat Gelsinger, Intel’s chief executive, announced that its 125,000-strong workforce would shrink, too, by more than 15,000. So will its annual capital spending, from over $25bn to just $20bn, and its yearly dividend, from $3bn to nothing. “Our costs are too high, our margins are too low,” Mr Gelsinger wrote in a letter to employees. Its share price contracted by a third in the following days. Industrial-policy fans in the Biden administration, eager to revive domestic chipmaking, would be excused for worrying about their national champion.
> Mr Gelsinger, who was Intel’s technology chief before later running a cloud-software firm, is not wholly to blame. He was brought back in 2021 to get the company on track after a string of beancounter-bosses failed to spot big changes reshaping the industry. In the late 2000s fat profits from the pc business blinded Intel to surging demand for mobile-phone chips. It stuck to making its own processors even as rivals went “fabless”, outsourcing production to “foundries” such as tsmc of Taiwan. Repeated manufacturing slip-ups delayed the launch of new central processing units (cpus) and let amd, a fabless rival working with tsmc, steal market share. And lately Intel utterly missed the rise of specialist ai chips, which before a recent stockmarket wobble briefly turned Nvidia into a $3trn behemoth.
> Mr Gelsinger’s original turnaround idea centred on segmenting Intel into a fabless design studio and Intel Foundry Services (ifs). Unshackled from in-house production, the design unit could pick the best foundry for its purposes. Stripped of a captive client, ifs would win business on its own merits. All very sensible. Except that it took for granted Intel’s ability to keep making money from cpus and to reclaim stewardship of Moore’s law, which it forfeited to tsmc owing to those production blunders. This has proved, in the words of one exasperated analyst, “delusional”.
> Intel’s revenues sank from $79bn in 2021 to $55bn in the 12 months to June, as cyclical demand for cpus cooled. At ifs, promising advances have not stopped customers from harbouring doubts about its manufacturing chops. Reuters recently reported that Broadcom, a $700bn chip-designer, has tested Intel’s tsmc-beating process and concluded it is not yet ready for large-scale production. ifs’s one big contract is with its sister unit—which, in a show of sibling cruelty, tasks tsmc with its high-end wares.
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ednamode23 on
Apple Silicon beats Intel so hard it’s not even funny. I upgraded my MacBook from a 2017 Air (Intel) to 2023 M3 Pro (Apple Silicon) earlier this year and the performance difference is astounding. Meanwhile my computer at work is also Intel and it sucks so bad. In fact, I’m stuck in a restarting loop right now because the damn thing overheated once again and the IT keeps making excuses why they can’t get me a new one.
WAGRAMWAGRAM on
Why don’t the US just break big companies like the Chinese did to bring competition?
3 Comments
> Since its founding in 1968 Intel has been synonymous with shrinkage. In its first four decades this was high praise. Every two years or so the American chip pioneer came out with new transistors half the size of earlier ones, a regularity that came to be known as Moore’s law, after one of the company’s founders. Twice as many chips thus fit onto roughly the same silicon wafer—and could be sold profitably for roughly the same price. That allowed Intel to corner the market for memory chips and then, when “memories” became commoditised in the 1980s, for the microprocessors which powered the subsequent pc revolution.
> Nowadays when “Intel” and “shrinking” are uttered in the same breath it is no longer a compliment. After two sets of disastrous quarterly earnings the company’s market value has shrivelled to $84bn, less than the value of its plants and equipment, from over $210bn in January. The artificial-intelligence (ai) boom’s voracious appetite for silicon has propelled other chip firms, but Intel’s shares have seldom been this cheap since the late 1990s. It may be about to be booted out of the Dow Jones Industrial Average, possibly in favour of Nvidia, the champion of ai chips.
> In early August Pat Gelsinger, Intel’s chief executive, announced that its 125,000-strong workforce would shrink, too, by more than 15,000. So will its annual capital spending, from over $25bn to just $20bn, and its yearly dividend, from $3bn to nothing. “Our costs are too high, our margins are too low,” Mr Gelsinger wrote in a letter to employees. Its share price contracted by a third in the following days. Industrial-policy fans in the Biden administration, eager to revive domestic chipmaking, would be excused for worrying about their national champion.
> Mr Gelsinger, who was Intel’s technology chief before later running a cloud-software firm, is not wholly to blame. He was brought back in 2021 to get the company on track after a string of beancounter-bosses failed to spot big changes reshaping the industry. In the late 2000s fat profits from the pc business blinded Intel to surging demand for mobile-phone chips. It stuck to making its own processors even as rivals went “fabless”, outsourcing production to “foundries” such as tsmc of Taiwan. Repeated manufacturing slip-ups delayed the launch of new central processing units (cpus) and let amd, a fabless rival working with tsmc, steal market share. And lately Intel utterly missed the rise of specialist ai chips, which before a recent stockmarket wobble briefly turned Nvidia into a $3trn behemoth.
> Mr Gelsinger’s original turnaround idea centred on segmenting Intel into a fabless design studio and Intel Foundry Services (ifs). Unshackled from in-house production, the design unit could pick the best foundry for its purposes. Stripped of a captive client, ifs would win business on its own merits. All very sensible. Except that it took for granted Intel’s ability to keep making money from cpus and to reclaim stewardship of Moore’s law, which it forfeited to tsmc owing to those production blunders. This has proved, in the words of one exasperated analyst, “delusional”.
> Intel’s revenues sank from $79bn in 2021 to $55bn in the 12 months to June, as cyclical demand for cpus cooled. At ifs, promising advances have not stopped customers from harbouring doubts about its manufacturing chops. Reuters recently reported that Broadcom, a $700bn chip-designer, has tested Intel’s tsmc-beating process and concluded it is not yet ready for large-scale production. ifs’s one big contract is with its sister unit—which, in a show of sibling cruelty, tasks tsmc with its high-end wares.
!ping AI&DEV-ECON
Apple Silicon beats Intel so hard it’s not even funny. I upgraded my MacBook from a 2017 Air (Intel) to 2023 M3 Pro (Apple Silicon) earlier this year and the performance difference is astounding. Meanwhile my computer at work is also Intel and it sucks so bad. In fact, I’m stuck in a restarting loop right now because the damn thing overheated once again and the IT keeps making excuses why they can’t get me a new one.
Why don’t the US just break big companies like the Chinese did to bring competition?