Intel is facing many concerns in the market, especialy when losses in the first quarter of 2023 reached a historical high. As a result, Intel will hold the "Intel Internal Foundry Model Investor Webinar" on June 21, 2023.
At the webinar, Intel's executive vice president and CFO, David Zinsner, and vice president and general manager of corporate planning group, Jason Grebe, will explain the latest developments in Intel's foundry model, including how the foundry model will assist Intel's business transformation/operations and improve operational efficiency.
Intel has in recent years been mired in continuous delays in process technology, leading to a decline in competitiveness. In February 2021, Pat Gelsinger returned as CEO and officially announced the new IDM 2.0 strategy in March 2021, highlighting three key directions:
Firstly, Intel will continue to produce the majority of its products and actively use EUV technology to enable architectural updates and streamline processes. Secondly, Intel will continue to expand its capacity through partnerships with third-party foundries. Thus, it has been strengthening its existing relationships with TSMC, Samsung Electronics, GlobalFoundries (GF), and UMC. Thirdly, third-party foundries are now able to manufacture Intel products, including the chips for communication, networking and graphics.
Market still cautious
Notably, despite Intel's announcements on product launches, process advancements, outsourcing, and expansion plans in Europe and the United States, including the goal of rapidly developing five process nodes within four years and starting volume production of the 20A (2nm) node in the first half of 2024, followed by the 18A (1.8 nm) node in the second half, and receiving favorable responses from many customers in the foundry sector, the market still maintains a cautious view of Intel's execution and progress, mainly due to TSMC's process technology advancement and superior order-taking capabilities.
In a previous interview with DIGITIMES, Gelsinger clearly explained the separation of design and foundry businesses. He noted that Intel would establish strict firewalls internally to build customer confidence. Intel's commitment is to provide capacity while maintaining confidentiality. For Intel's internal product design teams, they can see Intel's manufacturing division as an internal foundry and utilize its manufacturing capabilities - or outsource production to external foundries.
An important part of the IDM 2.0 strategy is that Intel is not just a traditional foundry, but also a provider of system manufacturing, which includes not only wafer production but also packaging, software, and related standards. In fact, this is an aspect of IFS that draws the interest of many large customers. Intel sees a significant opportunity where some customers adopt Intel chip modules along with their own chip designs, and Intel has advanced packaging technology for multi-chip packaging.
The Intel Foundry Services (IFS) division will adopt a new approach in the first quarter of 2024, presenting a new income statement that will be separate from the product division, making the IFS's operational performance more transparent and clear. However, IFS has been operating with a revenue of only US$118 million in the first quarter of 2023, a year-on-year decrease of 24%, resulting in a loss of US$140 million. Currently, it is still burning cash.
Previously, Intel set a long-term goal to surpass Samsung and become the world's second-largest foundry by 2030. In 1990, the US had a global share of approximately 37% in chip manufacturing, which has now decreased to about 12%. Over the next ten years, Intel aims to raise it back to 30%.
The market predicts that Intel will continue to experience losses in the first half of 2023, and although new products will be introduced in the second half, the profitability will be significantly challenged due to the uncertain recovery of the PC and server markets.
