Everyone loves to tell people what they should do and when someone’s in trouble, the urge to give advice becomes acute.
Intel’s in trouble and it’s getting no shortage of advice on how to get out of it. The latest comes from IC Insights.
First, the diagnosis:
‘In 2013, Intel registered its third consecutive year of poor sales growth. In fact, the company logged a 2% decline in IC sales, eight points worse than the 6% growth rate displayed by the worldwide IC market. Moreover, its outlook for 2014 was for more of the same—relatively flat revenue growth in an IC market that IC Insights expects will increase 7%.’
Then the prescription:
Intel should open its shuttered Fab42 in Arizona to grab Apple’s estimated $3.4 billion foundry spend with Samsung, says IC Insights.
‘If Apple did agree to have Intel make its application processors at the 10nm node in Fab 42, it would gain access to the most leading edge processing technology in the world,’ says IC insights, ‘IC Insights believes that Intel is approximately one year ahead of both Samsung and TSMC in IC process technology – an advantage that Apple could parlay into a significant performance advantage in both the tablet PC and smartphone markets.’
Snag with prescription:
Although IC Insights may be correct in the one year advantage for Intel’s leading edge process, this begs the question: is Intel’s leading edge process optimised for mobile?
I think everyone knows it’s not – it’s optimised for performance.
Intel has always made its own mobile processors going back to X-Scale days and before, on processes behind the leading edge.
If Intel optimised its leading edge process for mobile, and made Apple’s processors on that leading edge process, it would make x86-based processors made on old processes look an even worse bet for the mobile market.
And if Intel put x86 mobile processors on leading edge processors it would destroy a business model set up to make $100+ die.
While if Intel ever put its server processors on less than its latest process it would lose that business to ARM-based processors.
Will Intel ever optimise it’s leading process for anything other than performance? I don’t think so.
It’s always been an IC industry shibboleth that you shouldn’t compete with your customers.
Can Intel run with the mobile x86 fox and hunt with the Apple hounds?
Intel problem No.2 which IC Insights addresses is how to boost Intel’s woeful market share in mobile.
IC Insights supports Intel’s strategy to pay the price difference between its newest Atom-based x86 processor (“Bay Trail”) and an ARM processor if a tablet manufacturer used Intel’s system-on-chip MPUs in its product.
In addition, Intel said it would pay the design or redesign cost that a tablet maker would encounter to build its new 22nm Atom SoC processor into the system.
IC insights accepts Intel’s estimate for the cost of this to be $500 million, but Stacy Rasgon at Bernstein Research reckons it will be more like $2 billion because it assumes a $50 per tablet subsidy on 40 million tablets.
On Intel’s internal target of 60 million tablets that will of course be a $3 billion subsidy – not a massive subsidy for a $50 billion revenue company – but what if it doesn’t work?
If the tablet manufacturers then say they’re going back to ARM for the next generation of tablet processors, then Intel will have to keep paying its subsidies and giving away tablet chips at cost, or below cost, and no business can run like that for long.
“You’ve only to pay them the Danegeld, and you’ll never get rid of the Dane.”