Intel being on life support is a bit of a stretch. They are investing an awful lot of money, and it's going to take time for those investments to pay off.
I worry more about their inept handling of recent CPU bugs than I do about their stock price or reduced dividends.
That was my impression, until the news came out that they had a massive round of layoffs. That looks like the opposite of investing, poisons the climate, causes people who can to seek greener pastures (potentially further disrupting those projects they allegedly invest into), ...
I'm sure there were other bad news that caused their stock drop from $30 to $20, and it's hard to separate the impact of the layoff from those, but I wouldn't be surprised if the layoff news (that generally tend to push stock values up for companies in a different situation) contributed to it (due to lowering confidence that the investments will happen and work out).
The investments OP is referring to are almost certainly the CapEx investments related to opening new fabs and the aggressive push to launch new leading edge nodes.
Yes, layoffs suck, but Intel seems to be in a position where something had to give, and giving up on building a leading edge fab would almost certainly lead to a death spiral. Additionally, Intel was and still is a huge company. They have more employees than TSMC & AMD combined (an imperfect comparison, but probably as close as one can get).
It slipped by me how much AMD eating a little more every quarter really added up over the last ~5 years. (~9% to ~50% of datacenter revenue)
Also, the foundry stuff just isn't working as a financial exercise: they can't split it out as a division and massively subsidize it and seem responsible. And there's ~0 light on the horizon. No one wants to use it, even Intel is falling back to using TSMC's leading nodes now, which is letting it tread water against ARM in laptops.
If their confusing plan to do 5 nodes in 2 years or whatever works out, that'd enable them to start reversing the tide: they'd still have to build the same muscles TSMC has from always being a foundry, like having generic designs that are already in the market available, and convince people to switch suppliers, which is always risky, and usually done over years.
I really do not know, there's reporting of Broadcom working with Intel to eventually produce on 18A this of course was spinned as if Broadcom was disappointed 18A is not yet production ready because clicks are a must. It wasn't supposed to kick into high volume until 2025. https://www.reuters.com/technology/intel-manufacturing-busin...
> The tests conducted by Broadcom involved sending silicon wafers - the foot-wide discs on which chips are printed - through Intel's most advanced manufacturing process known as 18A, the sources said. Broadcom received the wafers back from Intel last month. After its engineers and executives studied the results, the company concluded the manufacturing process is not yet viable to move to high-volume production.
and
> A Broadcom spokesperson said the company is "evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation."
The make or break is not this summer. It's next. Gelsinger himself said he bet the company on 18A. If it doesn't work out then yeah, Intel is in very deep trouble but until then, Intel still has 29B cash on hand which is not chump change.
It's not that I stan for Intel, the heck do I care, I dislike the reporting that goes around this topic.
Intel is a tarnished brand, sullied by unfixable bugs, suicidal chips, security holes, poorly executed "next gen" ideas, and worse. The only thing they're capable of these days, seemingly, is re-releasing slightly optimized, nearly two decade-old architecture... The people who actually choose their CPU (gamers for the most part) have abandoned Intel in droves. Intel is floundering at an epic scale, and showing no end in sight.
Can their long term investments bear fruit? One might hope... but continuing to flail helplessly in the face of the first actual competition in decades may not allow them to harvest that crop effectively.
The near two-decade vacation Intel took from actually being good is insane in hindsight. They thought their competition was dead (due to Intel's own illegal behavior), so they just kept copy/pasting the same garbage over and over, shoveling it to the population with ever increasing price tags (anyone remember the days of $5,000-$10,000+ "gaming" CPU's?).
If any company deserves to fail, it is Intel. Their story is simultaneously hilarious and sad.
I worry about selling off large chunks of their business for short term stock gains, and halting modernization and new fab builds. It's just weird. Upper management is panicking, totally the wrong message to send.
But the article mentions that capital spending is down. Their revenue is also not really growing to support even bigger investments. Government subsidy will only take them so far. And they have stronger competitors in almost every domain they compete in.
Sure, but the new fabs take time to build and spin up. I don't know how exactly they spend that money, but I'm guessing a large amount is up front (acquiring land and starting construction etc), so it doesn't seem impossible that spending slows down once construction is well under way?
> 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.
Holy smokes. I just looked at the INTC 5 year chart and it is, in fact, a bath of blood. I don't think it happens very often that the market cap of a company is less than the worth of its physical assets.
There was a time when Apple had a market cap approximately equal to its book value, about 4 billion.
This was when basically every article about the company used the word beleaguered, they couldn’t actually ship the computers people wanted to buy, and they were flailing around with their next gen os.
It's hard to value said assets. You'd need a buyer for the fabs to run them as a going concern for them to be worth more than the scrap value and it's not obvious who that buyer might be. Piles of stock noone wants to buy probably aren't assets either, and the expensive office space might not be either.
Being worth less than your assets and liabilities is an extremely dangerous position to be in. The only reason they haven’t been bought and stripped for parts is the fact that the government probably would block it.
I was contemplating the same thing. I get Intel isn't doing so well but I really can't imagine it just collapsing and dying. That said another possibility is just years of stagnation and low returns on your investment
I don't invest in stocks so this might be a stupid question: I get that Intel is undervalued now. If things go right it should have a significant premium over its current value. But doesn't that also depend on the rest of the semiconductor sector? Let's say the AI boom bursts. Wouldn't this be a big hit for Intel due to slowdown of semi market, although they are doing good?
I think it will all up to whether Intel can regain its technological edges. For years, Intel did produced worse chips in terms of power efficiency (vs ARM) and performance (vs AMD) but now it looks like the chip design has caught up given that Intel on TSMC now shows comparable power efficiency to ARM. I think the playground is now leveled in terms of chip design.
The real problem is the manufacturing process. This used to be the power house for Intel. They kept it 5 years ahead of their competitors before the Krzanich era. But in all the geopolitical and infrastructural contexts, is it even feasible to restore that in America? It is not very clear. Intel needs to build up all the ecosystems for semiconductor manufacturing but America is far, far behind of Taiwan (and eastern Asia in general).
I think Gelsingers plan is sound, but they have only one try left after they desired to skip 20A to save money. It's 18A or bust. If 18A is not success, Intel will drop out of manufacturing. If 18A does well, Intel is back making money next to TSMC.
So far 18A seems to be a success. Already sub-0.40 D0 defect density and launch at some time 2025Q3 and fully ramped up in 2026.
Fabs will bleed money 2024 and 2025, there is no way around it.
This is kind of normal in the industry too. Some nodes are skipped by the fabs, some are skipped by the customers even (TSMC 20nm, 7nm etc). If there's not much customer traction why bother.
They skip the node means no customer demand an no incoming money. If 18A is merely meh, they run out of money, and 14A never happens. Someone else buys the assets and Intel will not compete with Samsung or TSMC.
No one in their right mind would think this is going to be a smooth ride. The massive amount of capital required to build cutting-edge fabs is a hard pill to swallow. These news writers need to cut Intel some slack. The world needs cutting-edge fabs in geopolitically stable locations. I believe Intel is simply too critical to fail at this point, and, as always, Uncle Sam won't let them.
Is intel even in a position to be competitive on the fab level? I was under the impression intel's fabs haven't been "cutting edge" for a long time now.
Of course they are competitive. Look at benchmarks for AMD on TSMC and Intel. They are pretty close, close enough to be worth consideration both for consumer and b2b even today in 2024.
Just because they are second place, doesn't mean they have lost the race.
You really have 3 cutting edge players in fabrication. TSMC who is the best by a significant margin, and Intel/Samsung. TSMC is certainly winning right now, but they have not "won."
If Intel doesn't choke on its debt payments or corporate culture in the next 3-5 years, they will have one shot at pulling the nose up out of their dive. Of course their altitude is low enough that if they fail to execute in even a small way they will hit the ground.
Intel is behind TSMC by maybe a year or two at most. Both TSMC and Intel are shipping products fabricated on 3nm-class fabrication today, but according to Intel's own slides they while they are roughly competitive on performance/watt, they are still behind on density and cost.
Intel certainly had those things. It has lots of interesting IP around processor design and tooling locked away in source control and so forth.
I think it is critically important whether Intel has retained the engineers who knew how to build world class products. Nehalem was excellent and shipped in 2008 so I'm sure they had the skills back then. They used to have a reputation for paying well.
It seems plausible that Intel is a bureaucratic horror show that no longer pays competitively, in which case it would be difficult to see why the engineers would still be there. Especially with redundancy offers waved around roughly annually.
It is the same old story. Once the bean counters take charge, pandering to Wall St becomes the one and only priority. Engineering is deemed an expense and thus has to be cut and cut. The old experienced engineers retire and the new generation of engineers gravitate to companies with more favorable culture.
I'm going to call it, and write it here so that I can link back to this comment in a few years to see how right or wrong I was.
Prediction: Intel is done. It will become a zombie company like IBM or Oracle in a few years, without the license lock-in moat keeping those rotting corpses alive, but may be able to offer cheaper fab services for "it just was the state of the art" chip manufacturing market. They'll continue to focus on becoming a financial optimization organization and never return to being a technical leader. They've become a company of pure inertia.
Reasons for the prediction:
1. Intel is not longer the process node leader and hasn't been for a while (when even was that? 14nm? 2014?).
2. Intel seems to be struggling to keep lead engineering talent, board members, and leaders of all kinds. Jim Kelly, Lip-Bu Tan, and so on. They still have Jeff Wilcox, but who knows for how long? At least the CEO is an engineer finally...I guess.
3. They continue to launch then retract in otherwise profitable markets, not taking any particular lead, but not continuing to invest until they get it. They still have really only one core business.
4. Their branding strategy seems to be built around confusing consumers in the hopes that they accidentally buy the wrong things. Successful companies can be clear in their product naming, zombie companies end up trying to stuff every single market niche with as much microtuned, barely differentiated, SKUs as possible. In actuality it's probably financial engineering to figure out what to do with various classes of yield issues. Disable the bad part of the chip, slap a K or KS, or KF, or T, or whatever on it and get it on the shelf. I counted over a dozen different Core i5 14 gen SKUs, and over 20! 13 gen Core i5 SKUs. There's probably 200 different brand-new-from-Intel CPU SKUs on the market today. Insane.
5. They're getting feature for feature beaten by smaller, lower stakes competitors both in and out of their ISA. Those same competitors are almost always cheaper, and made at other fabs. In otherwords, Intel doesn't lead anywhere and has no lock-in.
6. Their main moat, their ISA, can be comfortably virtualized or emulated elsewhere, bugs and all, at entirely useful speeds meaning there is a ready exit ramp as customers wish to take it.
There's probably more, and it's probably continues to paint a very poor picture, but there is very little reason today, or in the near future, to stay with Intel as a manufacturer except for inertia.
Readit News
I worry more about their inept handling of recent CPU bugs than I do about their stock price or reduced dividends.
That was my impression, until the news came out that they had a massive round of layoffs. That looks like the opposite of investing, poisons the climate, causes people who can to seek greener pastures (potentially further disrupting those projects they allegedly invest into), ...
I'm sure there were other bad news that caused their stock drop from $30 to $20, and it's hard to separate the impact of the layoff from those, but I wouldn't be surprised if the layoff news (that generally tend to push stock values up for companies in a different situation) contributed to it (due to lowering confidence that the investments will happen and work out).
Yes, layoffs suck, but Intel seems to be in a position where something had to give, and giving up on building a leading edge fab would almost certainly lead to a death spiral. Additionally, Intel was and still is a huge company. They have more employees than TSMC & AMD combined (an imperfect comparison, but probably as close as one can get).
It slipped by me how much AMD eating a little more every quarter really added up over the last ~5 years. (~9% to ~50% of datacenter revenue)
Also, the foundry stuff just isn't working as a financial exercise: they can't split it out as a division and massively subsidize it and seem responsible. And there's ~0 light on the horizon. No one wants to use it, even Intel is falling back to using TSMC's leading nodes now, which is letting it tread water against ARM in laptops.
If their confusing plan to do 5 nodes in 2 years or whatever works out, that'd enable them to start reversing the tide: they'd still have to build the same muscles TSMC has from always being a foundry, like having generic designs that are already in the market available, and convince people to switch suppliers, which is always risky, and usually done over years.
> The tests conducted by Broadcom involved sending silicon wafers - the foot-wide discs on which chips are printed - through Intel's most advanced manufacturing process known as 18A, the sources said. Broadcom received the wafers back from Intel last month. After its engineers and executives studied the results, the company concluded the manufacturing process is not yet viable to move to high-volume production.
and
> A Broadcom spokesperson said the company is "evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation."
The make or break is not this summer. It's next. Gelsinger himself said he bet the company on 18A. If it doesn't work out then yeah, Intel is in very deep trouble but until then, Intel still has 29B cash on hand which is not chump change.
It's not that I stan for Intel, the heck do I care, I dislike the reporting that goes around this topic.
Can their long term investments bear fruit? One might hope... but continuing to flail helplessly in the face of the first actual competition in decades may not allow them to harvest that crop effectively.
The near two-decade vacation Intel took from actually being good is insane in hindsight. They thought their competition was dead (due to Intel's own illegal behavior), so they just kept copy/pasting the same garbage over and over, shoveling it to the population with ever increasing price tags (anyone remember the days of $5,000-$10,000+ "gaming" CPU's?).
If any company deserves to fail, it is Intel. Their story is simultaneously hilarious and sad.
Deleted Comment
Holy smokes. I just looked at the INTC 5 year chart and it is, in fact, a bath of blood. I don't think it happens very often that the market cap of a company is less than the worth of its physical assets.
This was when basically every article about the company used the word beleaguered, they couldn’t actually ship the computers people wanted to buy, and they were flailing around with their next gen os.
The real problem is the manufacturing process. This used to be the power house for Intel. They kept it 5 years ahead of their competitors before the Krzanich era. But in all the geopolitical and infrastructural contexts, is it even feasible to restore that in America? It is not very clear. Intel needs to build up all the ecosystems for semiconductor manufacturing but America is far, far behind of Taiwan (and eastern Asia in general).
So far 18A seems to be a success. Already sub-0.40 D0 defect density and launch at some time 2025Q3 and fully ramped up in 2026.
Fabs will bleed money 2024 and 2025, there is no way around it.
Just because they are second place, doesn't mean they have lost the race.
You really have 3 cutting edge players in fabrication. TSMC who is the best by a significant margin, and Intel/Samsung. TSMC is certainly winning right now, but they have not "won."
If Intel doesn't choke on its debt payments or corporate culture in the next 3-5 years, they will have one shot at pulling the nose up out of their dive. Of course their altitude is low enough that if they fail to execute in even a small way they will hit the ground.
Intel certainly had those things. It has lots of interesting IP around processor design and tooling locked away in source control and so forth.
I think it is critically important whether Intel has retained the engineers who knew how to build world class products. Nehalem was excellent and shipped in 2008 so I'm sure they had the skills back then. They used to have a reputation for paying well.
It seems plausible that Intel is a bureaucratic horror show that no longer pays competitively, in which case it would be difficult to see why the engineers would still be there. Especially with redundancy offers waved around roughly annually.
I reckon they're dead.
McDonnell Douglas takeover Boeing is an example.
Prediction: Intel is done. It will become a zombie company like IBM or Oracle in a few years, without the license lock-in moat keeping those rotting corpses alive, but may be able to offer cheaper fab services for "it just was the state of the art" chip manufacturing market. They'll continue to focus on becoming a financial optimization organization and never return to being a technical leader. They've become a company of pure inertia.
Reasons for the prediction:
1. Intel is not longer the process node leader and hasn't been for a while (when even was that? 14nm? 2014?).
2. Intel seems to be struggling to keep lead engineering talent, board members, and leaders of all kinds. Jim Kelly, Lip-Bu Tan, and so on. They still have Jeff Wilcox, but who knows for how long? At least the CEO is an engineer finally...I guess.
3. They continue to launch then retract in otherwise profitable markets, not taking any particular lead, but not continuing to invest until they get it. They still have really only one core business.
4. Their branding strategy seems to be built around confusing consumers in the hopes that they accidentally buy the wrong things. Successful companies can be clear in their product naming, zombie companies end up trying to stuff every single market niche with as much microtuned, barely differentiated, SKUs as possible. In actuality it's probably financial engineering to figure out what to do with various classes of yield issues. Disable the bad part of the chip, slap a K or KS, or KF, or T, or whatever on it and get it on the shelf. I counted over a dozen different Core i5 14 gen SKUs, and over 20! 13 gen Core i5 SKUs. There's probably 200 different brand-new-from-Intel CPU SKUs on the market today. Insane.
5. They're getting feature for feature beaten by smaller, lower stakes competitors both in and out of their ISA. Those same competitors are almost always cheaper, and made at other fabs. In otherwords, Intel doesn't lead anywhere and has no lock-in.
6. Their main moat, their ISA, can be comfortably virtualized or emulated elsewhere, bugs and all, at entirely useful speeds meaning there is a ready exit ramp as customers wish to take it.
There's probably more, and it's probably continues to paint a very poor picture, but there is very little reason today, or in the near future, to stay with Intel as a manufacturer except for inertia.