Speculation: Intel will become fabless

[JasonLD]

They may still go fabless. If they can create a viable foundry business, they might spin it off and become its largest customer, like AMD did with GF.

I think at most, IFS will become wholly owned subsidiary business of Intel. AMD was forced to spinoff GF just to survive after all.

 

[Vattila]

I think at most, IFS will become wholly owned subsidiary business of Intel.

Now we have Intel co-investing in fabs with partners with a 51/49 percent ownership model. I think this development is a big step toward a fully independent IFS, effectively splitting Intel into independent design and manufacture businesses. As I may have stated previously, I think independence is needed to gain full support from the industry (and governments), and hence necessary for the success of IFS.

Intel Introduces First-of-its-Kind Semiconductor Co-Investment Program

Intel Corporation today announced a first-of-its-kind Semiconductor Co-Investment Program (SCIP) that introduces a new funding model to the capital-intensive semiconductor industry. As part of its program, Intel has signed a definitive agreement with the infrastructure affiliate of Brookfield...

www.techpowerup.com

 

[JasonLD]

Now we have Intel co-investing in fabs with partners with a 51/49 percent ownership model. I think this development is a big step toward a fully independent IFS, effectively splitting Intel into independent design and manufacture businesses. As I may have stated previously, I think independence is needed to gain full support from the industry (and governments), and hence necessary for the success of IFS.

Intel Introduces First-of-its-Kind Semiconductor Co-Investment Program

Intel Corporation today announced a first-of-its-kind Semiconductor Co-Investment Program (SCIP) that introduces a new funding model to the capital-intensive semiconductor industry. As part of its program, Intel has signed a definitive agreement with the infrastructure affiliate of Brookfield...

www.techpowerup.com

Nah, I think it is a bit premature to assume Intel will spin off their IFS. It may enable Intel to get more fund out of Chips Act by inviting another company in the mix, and overall less money out of their own pocket by getting outside investment.

 

[maddie]

Mixing threads here.

This might also be a good way in freeing resources to continue with the client GPU project. We really want GPUs, but how do we fund it with next few years of reduced revenue.

 

[Doug S]

Nah, I think it is a bit premature to assume Intel will spin off their IFS. It may enable Intel to get more fund out of Chips Act by inviting another company in the mix, and overall less money out of their own pocket by getting outside investment.

Interest rates are going up, so maybe instead of borrowing money for capital projects they feel it is better to take on partners in some cases?

I agree it is an interesting development, and if we see this become their model for new fabs going forward I think going fabless becomes inevitable.

 

[jpiniero]

From Intel's financial statements, the new "co-investment" entity has a name (Arizona Fab LLC) and says they are planning on this closing by the end of the year. Also says Intel is required to use the two fabs at an unspecified minimum level or face penalties... which sounds pretty WSAish.

 

[DrMrLordX]

Also says Intel is required to use the two fabs at an unspecified minimum level or face penalties... which sounds pretty WSAish.

Tell me Hector Ruiz isn't involved in this deal.

 

[Doug S]

From Intel's financial statements, the new "co-investment" entity has a name (Arizona Fab LLC) and says they are planning on this closing by the end of the year. Also says Intel is required to use the two fabs at an unspecified minimum level or face penalties... which sounds pretty WSAish.

I wonder if this is some sort of financialization scheme as much as it is about co investment. Intel is losing money now, and will have a TON of writeoffs coming from their fab investments over the next few years. But when you aren't making money, tax deductions aren't of much use. Sure, you can carry them forward but the time value of money means they are worth less in the future than today (and it only gets worse if there's inflation)

The co-investment strategy allows them to essentially "sell" a lot of those writeoffs. Maybe all of them, if this is structured in a way where the outsider investor is able to take more of the losses than their percentage of ownership (don't ask me how, that's what they pay all that money for top tax accountants/lawyers to find loopholes in text vs intent of tax laws)

The investor will put in some minimal requirements about how much Intel must use these fabs, etc. to insure they can't walk away if things get bad for them, but probably the plan is that the investor sells their interest after a few years when the bulk of the amortization has been written off. The buyer will either be Intel, or if they have gone / are planning to go fabless, the fab holding company spinoff.

 

[Vattila]

Intel now calls their chip design business units "internal fabless customers" of IFS:



Internal Foundry Model — Investor Webinar June 21, 2023

Here is an article on the webinar:

"Intel’s vision is that it regains process leadership and continues building chips for other customers. At the same time, it is really hard to look at messaging that Intel is creating a P&L for its foundry business that charges Intel BUs prices more in line with external customers to give a true P&L as anything but a setup. It feels like this is a setup to announce a spin-off in a few years. We know it is a capital intensive business, but Intel in its IDM 1.0 and 2.0 accounting slide shows that it is planning to show the businesses as two P&L’s. That is exactly what one would do before spinning off fabs."

Intel Manufacturing Gets its Own Profit and Loss Potentially Gearing Up for a Spin-Off

Intel is giving its manufacturing arm its own P&L to help drive cost reductions. The announcement feels a lot like it is gearing for a split

www.servethehome.com

 

[jpiniero]

Definitely seems like they are inching their way to spinning off.

 

[Doug S]

Definitely seems like they are inching their way to spinning off.

They really have to if they want to truly compete as a foundry. One of the reasons Apple left Samsung was they didn't want to help support their biggest competitor. If Samsung's foundry business was truly a separate company (not part of the overall chaebol) they might not have had that incentive to do. Who knows, maybe if Apple had stuck around all that extra revenue would have allowed them to do better on their last few nodes and not fallen behind TSMC and/or TSMC wouldn't have done as well - Apple accounts for about 25% of their revenue so obviously that translates in more investment in R&D and fab building.

 

[A///]

Five years ago if you asked me if I ever thought Intel would spin their fabs off I'd have told you to lay off the crack cocaine. At this juncture in time it would be essential for them to ease their investors into knowing their plans. It'll reduce or eliminate all the blowback. I don't know the inner workings of how intel operates but I remember reading that Intel pays their own fabs to make wafers ever month despite being the same company. If any former Intel folks who post on here or are familiar with the company's SOP feel free to give a shout. I don't see this as a true spin off but a company held by Intel at 100% ownership, a subsidiary. It's technically a spin off but at the same time it isn't.

 

[jpiniero]

I don't see this as a true spin off but a company held by Intel at 100% ownership, a subsidiary. It's technically a spin off but at the same time it isn't.

It's just the next step.

 

[Doug S]

Five years ago if you asked me if I ever thought Intel would spin their fabs off I'd have told you to lay off the crack cocaine. At this juncture in time it would be essential for them to ease their investors into knowing their plans. It'll reduce or eliminate all the blowback. I don't know the inner workings of how intel operates but I remember reading that Intel pays their own fabs to make wafers ever month despite being the same company. If any former Intel folks who post on here or are familiar with the company's SOP feel free to give a shout. I don't see this as a true spin off but a company held by Intel at 100% ownership, a subsidiary. It's technically a spin off but at the same time it isn't.

That's not a spin off if Intel fully controls it. That's the arrangement Samsung has with its foundry, and when Jobs was pissed at Samsung's mobile division that fake on paper separation didn't stop him from taking Apple's business to TSMC. Apple is responsible for 25% of TSMC's revenue - having Apple would probably double or triple Samsung's foundry revenue, so that organizational decision ended up having HUGE consequences!

Do you really think Intel could ever win AMD's business with such a Chinese wall arrangement? If Intel starts competing with GPU/AI for real would Nvidia be willing to consider them? Would Apple truly trust putting all their eggs into Intel's basket if they don't believe those in-house x86 CPUs won't get preferential treatment when wafers are scarce?

No, I think when it is spun off it is really spun off, with Intel's shareholders receiving an equivalent stake in the new company which then trades under its own ticker and operates under its own management. It won't even have "Intel" in the name.

 

[A///]

That's not a spin off if Intel fully controls it. That's the arrangement Samsung has with its foundry, and when Jobs was pissed at Samsung's mobile division that fake on paper separation didn't stop him from taking Apple's business to TSMC. Apple is responsible for 25% of TSMC's revenue - having Apple would probably double or triple Samsung's foundry revenue, so that organizational decision ended up having HUGE consequences!

Do you really think Intel could ever win AMD's business with such a Chinese wall arrangement? If Intel starts competing with GPU/AI for real would Nvidia be willing to consider them? Would Apple truly trust putting all their eggs into Intel's basket if they don't believe those in-house x86 CPUs won't get preferential treatment when wafers are scarce?

No, I think when it is spun off it is really spun off, with Intel's shareholders receiving an equivalent stake in the new company which then trades under its own ticker and operates under its own management. It won't even have "Intel" in the name.

you're assuming with a full spin off intel wouldn't try shady dealings behind their clients backs. steve jobs did what he felt fine with, none of these other companies are steve jobs. as far as im concerned jobs is six feet underground and has been for over a decade. what he did or his opinions have zero relevant to future intel customers. they can go with tsmc who may have a worser product or samsung assuming samsung has removed their head from their ass.

 

[Ajay]

Having IFS under Intel right now is the only way. I don't see how there would be any way to raise the capital needed for a seperate foundry. Too risky in light of the competition. 5-10 years down the line once IFS has developed good relations with some high volume ($$ or unit) customers - there could be a case for a spin-off with some investment from Big Banks and eventual IPO.

 

[Doug S]

you're assuming with a full spin off intel wouldn't try shady dealings behind their clients backs.

What sort of "shady dealings"? Obviously any company or person is capable of being shady, but a fully spun off "USA foundry" or whatever they called it (it would be some weird name like Kyndryl no doubt) would have no incentive to act behind the scenes on Intel's behalf. They wouldn't have common ownership, and they'd know if they were caught the value of the business (and thus the stock/bonus incentives its management had) would plummet.

 

[Doug S]

Having IFS under Intel right now is the only way. I don't see how there would be any way to raise the capital needed for a seperate foundry. Too risky in light of the competition. 5-10 years down the line once IFS has developed good relations with some high volume ($$ or unit) customers - there could be a case for a spin-off with some investment from Big Banks and eventual IPO.

Intel has cash, and plenty of ability of raise more via debt offerings. There's nothing stopping them from splitting the two in a way that gave the foundry most of the cash along with all the fab buildings/property.

I'm not saying they should do it tomorrow - there's no point until they prove they are executing on their roadmap and start to get some smaller foundry wins. But for the big fish, a split (or at least an announced date of a split) would really help their chances to land them.

 

[jpiniero]

Intel has cash, and plenty of ability of raise more via debt offerings. There's nothing stopping them from splitting the two in a way that gave the foundry most of the cash along with all the fab buildings/property.

I'm not saying they should do it tomorrow - there's no point until they prove they are executing on their roadmap and start to get some smaller foundry wins. But for the big fish, a split (or at least an announced date of a split) would really help their chances to land them.

But would they do that. It seems like the most likely outcome of a split is Intel ditches Intel Foundry and goes TSMC full time.

 

[Ajay]

But would they do that. It seems like the most likely outcome of a split is Intel ditches Intel Foundry and goes TSMC full time.

WSA deal?

 

[maddie]

But would they do that. It seems like the most likely outcome of a split is Intel ditches Intel Foundry and goes TSMC full time.

There goes that theory that Intel will resume node leadership.

 

[maddie]

WSA deal?

Didn't AMD sell because of lack of funds? Not exactly the same here.

 

[moinmoin]

But would they do that. It seems like the most likely outcome of a split is Intel ditches Intel Foundry and goes TSMC full time.

Could well be the other way around, Intel ditching design and becoming a pure play foundry company. Would make perfect sense considering how Pat made the heavy cuts in silicon design, not in foundry business. The rebranding of iCore to Core fits with this as well.

 

[Ajay]

Didn't AMD sell because of lack of funds? Not exactly the same here.

That Intel "Computation Group' or whatever, will continue to use IFS for a specified period of time to make sure that confidence is high wrt other customers using IFS. I think, with some reasonable exceptions, that this would be necessary - at least initially.

 

[Doug S]

But would they do that. It seems like the most likely outcome of a split is Intel ditches Intel Foundry and goes TSMC full time.

They'd have a contract with them for a good number of years, and assuming their process roadmap is real what incentive would they have to go TSMC if TSMC is no longer ahead of Intel?

Intel foundry, at least the fabs in the US (OR/AZ and soon OH) would have a major advantage when bidding for government contracts that even US based TSMC and Samsung fabs don't, since it would be a company listed on the US stock market, headquartered and managed in the US.

They would only need to maintain parity with TSMC to win Apple's business (OK parity and the capacity to handle them) as well as other US based for whom "made in the USA" is seen as a positive - especially since getting the assembly of electronic devices out of China is going to take many years, just like it took many years to move the whole supply chain over there. But chips are a high value component that will assuage some of those concerns at least from a political standpoint.

The only reason a split would end up with Intel ditching their former fabs for TSMC is if the fabs can't deliver on their roadmaps and stay behind TSMC. And if that's the case, isn't spinning off a failing part of your business better than keeping it and letting it drag down the successful part of your business along with it?