While newly minted Intel CEO Pat Gelsinger sought to inspire confidence in the company’s future when he told investors during last week’s Q4 earnings call that the company’s 2023 product portfolio would be build in-house, analysts say the chipmaker likely didn’t have a choice.
Intel has reportedly recovered from a 6-month delay to its upcoming 7-nanometer manufacturing process with shipments slated to begin in 2023. Earlier this month, progress on the upcoming process node was cast into doubt when Bloomberg reported Intel had entered into discussions with Taiwan Semiconductor Manufacturing Co. and Samsung Electronics to produce its top of the line chips.
However, according to Wayne Lam, senior director of research for the Americas at CCS Insight, this was never a “viable alternative.”
According to Lam, there just wasn’t time to outsource fabrication and have chips shipping by 2023 “Intel’s decision on their 2023 product and manufacturing plan has to be locked in now,” Lam wrote in an email to SDxCentral. “Even if they were going to outsource it to TSMC, it would likely take more time to qualify the out-sourced production process before TSMC can even make the first Intel chips.”
Realistically, Lam wrote that the earliest Intel could hope to outsource its fabrication would with the move to a 5-nanometer node, sometime around 2025. At that point, “Intel should have enough time to wind down any investments in manufacturing technology and qualify outside sources,” he added.
That’s not to say Intel won’t be leaning more heavily on outside partners moving forward. Intel already outsources the fabrication of its data-center GPU.
“Given the breadth of our portfolio, it’s likely that we will expand our use of external foundries for certain technologies and products,” Gelsinger said last week.
Gelsinger Enters the Ring
Glenn O’Donnell, VP and research director of infrastructure and operations at Forrester Research, noted that despite the challenges ahead for Intel, Gelsinger’s appearance on the call signified a “passing of the baton” and a new era for the chipmaker. Gelsinger will replace Intel’s current CEO Bob Swan on Feb. 15.
“Pat Gelsinger got on an actually did more material speaking than Bob Swan did,” he said.
O’Donnell argued that while Intel’s revenues remained a sticking point, particularly in the data centric business, it’s largely water under the bridge at this point. “That’s not what has people interested right now,” he said.
Instead, O’Donnell says all eyes are planted squarely on Gelsinger’s next moves, and whether he can give Intel the boost it needs to leapfrog the competition.
“They missed the boat on 7-nanometer, but is it too late to catch up? Well, maybe, but we’ll see,” O’Donnel said. “Pat has his work cut out for him. Catching up with 7-nanometer is going to be a lot of work and it’s going to require him to make some decisions that may be somewhat unpopular with certain people.”
Intel’s Declines Aren’t as Bad as They Look
On the topic of Intel’s revenues, the company exceeded expectations, posting revenues of $20 billion, down 1% year over year. Meanwhile, the chipmaker’s net-income was down 15%, which was slight better that its third quarter number, at $5.9 billion year over year.
And with the exception of Intel’s Mobileye autonomous driving division, the entire data-centric business unit saw declines during the quarter to the tune of 11% year over year.
Despite the bleak earnings call, O’Donnell pointed out that while data center revenues are down, their customers’ revenues were down too. “The Dells the HPEs and such of the world, they’re suffering and in the data center as well. The whole supply chain is suffering,” he added.
Lending credence to O’Donnell’s analysis, CCS Insight’s Geoff Blaber said that while Intel is facing strong competition in the data center it isn’t negatively impacting the company’s revenues just yet.
“The data center cloud business is becoming extremely cyclical as the hyperscalers go through intense periods of investment followed by digestion of that new capacity, Blaber wrote in an email to SDxCentral. “It was the same in 2020, and is likely to continue for another couple of quarters ahead of a new phase of investment.”
O’Donnell remains cautiously optimistic that with Gelsinger at the helm, Intel can turn things around.
“Let’s not forget who this guy is,” he said of Gelsinger. “If anyone can do it he can.”
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