Today Intel announced a number of updates in its manufacuturing operations. Intel has a plan to regain process leadership and redefine how it does business. Intel announced IDM 2.0, but the next step is interesting since it is effectively one of the key steps one would take if it was planning to spin off a business.
Intel Manufacturing Gets its Own Profit and Loss Potentially Gearing Up for a Spin-Off
Intel has two main challenges right now. First, it is seeing declining revenue, partly due to a cyclical market and partly due to missing product launch windows. Second, it is trying to ramp capacity in its fabs, while it is also utilizing TSMC for some leading-edge designs (further shifting capacity.) The second one really boils down to trying to ramp new costly processes. As such, the announcement today had a heavy cost focus.
One of the biggest concepts was that Intel is transitioning to IDM 2.0. We have covered this multiple times, but the transition will change the way that Intel looks at its manufacturing organization. Intel is going to start treating its internal business units more like external fabless customers. That means, revenue from IFS as well as its internal customers will now have its own P&L.
Intel explained that this is partly due to the resource allocation between Intel’s Manufacturing and BU sides.
Reading between the lines, Intel seems to have concluded that its internal customers have been taking advantage of the fact that the internal customers had a different price than market price on doing things like making small iterations on chips. Effectively, Intel’s BUs were behaving differently than if they had gone to external foundries.
In the IDM 1.0 world, that worked. Intel had process leadership and could charge a high margin for its products. This is what the picture looked like when Intel had technology leadership.
In one of the more honest slides, Intel said it went from leadership in the 14nm Intel v. 16nm TSMC era, but lost leadership in the 10nm Intel/ 7nm TSMC era. Intel also says it will take until Intel 18A against TSMC 2nm at this rate to regain process leadership. Intel 3 and Intel 20A seem behind TSMC 3nm from Intel’s slide projections.
To deal with this, plus the fact that with chiplets nodes will be used longer, Intel is going to start charging its BUs as it would an IFS external customer.
That will leave to a standalone P&L statement for the internal foundry. We mentioned how Intel is trying to change its BU behavior. Intel even had a slide saying as much. Here is the key: Intel in many ways will need to regain process leadership. If 18A slips, then its BUs may find external foundries more attractive. Intel says 18A is on track, but that is the risk here.
Intel thinks that it can improve margins.
Intel also thinks that
