S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
Banking & Capital Markets
Economy & Finance
Energy Transition & Sustainability
Technology & Innovation
Podcasts & Newsletters
Banking & Capital Markets
Economy & Finance
Energy Transition & Sustainability
Technology & Innovation
Podcasts & Newsletters
S&P Global Offerings
Featured Topics
Featured Products
Events
26 Jan, 2021
By Kevin Fogarty
Strong demand for PCs and data-center processors should drive solid revenue and profits for Intel Corp. for the next few months, but expenses will rise in the coming years if the company's incoming CEO is serious about reclaiming Intel's embattled position as an industry leader, analysts said.
While Intel's fourth-quarter 2020 revenue exceeded expectations, the company's chip technology is falling behind the development pace of competitors as it struggles to troubleshoot and refine its complex chip-manufacturing process. Repeated manufacturing problems in recent years have delayed Intel's ability to shrink its chips through several different sizes of process node, eroding its technological lead.
Intel's current 10-nanometer node size is trailing that of competitors such as Advanced Micro Devices Inc. and Taiwan Semiconductor Manufacturing Co. Ltd., which are already producing 7-nm chips and moving forward with developing even smaller sizes.
Recovering Intel's former position as "the unquestioned leader in process technology," a goal that incoming CEO Pat Gelsinger set out during the company's Jan. 21 earnings call, will require both investors' patience and tolerance for additional investment, analysts cautioned.
Accelerating the development of new chips and the processes to manufacture them is as big a challenge as designing the chips themselves, said Linley Gwennap, president and principal analyst at The Linley Group.
"Every process is built on the one before, so you can't really skip any steps, so unless TSMC runs into its own delays, it will be hard for Intel ever to catch up," the analyst said.
Intel's incoming CEO said the company might outsource the |
During Intel's earnings call, Gelsinger told analysts that the company is open to outsourcing more chips to TSMC, but not the desktop and data-center server CPUs that make up the core of its intellectual property.
Intel already outsources the manufacture of 15% to 20% of its special-function and noncore chips to TSMC, according to Matthew Bryson, a senior vice president of equity research at Wedbush Securities Inc.
If Intel continues to have trouble with manufacturing small process-node chip sizes, it could find itself in a position in which it had no choice but to hand off the manufacture of a core product to TSMC, Bryson said. Even so, making that happen would not be easy, he added, as it would likely require a licensing agreement that would add to the cost of Intel's new chips.
It would also take a year or more to modify an Intel design enough to allow it to be manufactured using a TSMC process, he said.
"Moving to a foundry, you can resolve manufacturing problems more quickly, but you have more of a problem differentiating your product from a competitor's," Bryson said. Also in question in such a scenario would be what Intel does with its own foundries — and whether TSMC would have the capacity to meet Intel's manufacturing needs.
"It seems like every week you see something showing the market getting tighter and tighter on the foundry front, so there are likely to be capacity issues for a while," Bryson said. "And Intel is big. If the chip is a high-volume one, TSMC isn't likely to be able to have the capacity to take that on."
The result could be a "worst of both worlds" economic model that would drive up Intel's product costs and require it to ramp up capital expenditures to expand its own fabrication plant capacity as well, according to Stacy Rasgon, managing director and senior analyst at Sanford C. Bernstein & Co. LLC.