How Intel plans to become the top chipmaker again, beating TSMC and Samsung
For decades, Intel was the first maker of the most advanced chips in the world. Lately, the company hasn’t been able to keep pace with the changes co-founder Gordon Moore envisioned for the tech industry.
Moore’s Law predicted that the density of transistors able to fit on a chip would double about every two years.
“Intel was Moore’s Law and the clear leader,” said Christopher Rolland, analyst at Susquehanna. “And something that was supposed to take them two years took them over five years. And they’re still struggling to reverse Moore’s Law today.”
While Intel’s new Alder Lake processors are packed with competitive features, its chip technology is inferior to Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung. Fifty years after Intel launched the 4004, the world’s first processor, it has been hampered by several production delays.
“We made a few missteps,” said Pat Gelsinger, who took over as head of Intel in February. “The strategy had gotten a little confusing about what role we’re going to play in manufacturing over the long term. And now we’re looking at that with clarity, with clear urgency.”
Gelsinger has an ambitious roadmap to catch up with and overtake Samsung and TSMC by 2025. Key to the plan is a series of new massive chip manufacturing plants, or fabs, that Intel is building in the United States, Europe and in Israel. Together, they will cost over $ 44 billion to build.
“I think I have more concrete trucks working for me today than any other human on the planet,” Gelsinger said. “We have constructions in Oregon, New Mexico, Arizona, Ireland and Israel. And we plan to plant our next big factories in the United States and Europe before the end of this year.
Doubling down on manufacturing is one of the main steps Gelsinger has taken since taking the helm. He also recently announced Intel Foundry Services, a company that is opening Intel factories to manufacture chips designed by Amazon, Qualcomm and other customers. For decades, markets have rewarded giants like Apple and Qualcomm for not having a factory. But the chip shortage has made chip manufacturing more attractive, allowing TSMC, for example, to raise chip prices by up to 20%.
“It takes time to build this infrastructure,” said Keyvan Esfarjani, senior vice president of manufacturing, supply chain and operations at Intel. “But the good news is the world is rallying around building more capacity.”
Intel Senior Vice President Keyvan Esfarjani and Intel CEO Pat Gelsinger at the grand opening of two new chip manufacturing plants in Chandler, Ariz. On Friday, September 24, 2021.
The world’s smallest and most efficient chips are commonly referred to as 5 nanometers, a nomenclature that once referred to the width of the transistors on the chip. They power cutting-edge data processing and the latest generation of Apple iPhones. TSMC and Samsung manufacture all these 5 nanometer chips in factories in Asia.
“They looked away from the ball,” said Stacy Rasgon, analyst at Bernstein. “Once you fall off the treadmill it’s really, really hard to come back. It’s a very dynamic and fast-paced industry.”
In 1990, 37% of the world’s semiconductors were made in the United States, according to the Semi industry association. Last year, the US market share fell to 12%, according to the association. The government hopes to change that with the CHIPS Act, which includes a $ 52 billion subsidy plan for chip companies like Intel that pledge to manufacture in the United States.
“It’s also starting to build that base in the United States, so the United States can become more self-sufficient,” said Ann Kelleher, senior vice president of technology development at Intel.
TSMC is responsible for 92% of the world’s 5-nanometer chips, according to the Capital Economics research group. This makes the global supply of chips vulnerable to natural disasters such as earthquakes and the region’s current drought. There is also the escalation of geopolitical tensions between China and Taiwan, as well as the trade war between the United States and China.
“Every aspect of defense, intelligence and government operations is becoming increasingly digital,” said Gelsinger. “And we want to rely on foreign technology for these critical aspects of our defense and national security? I don’t think so.”
Next steps in Intel’s playbook include a chip so efficient the company measured it not in nanometers, but with an even smaller unit of measurement called angstrom. Intel said the 18a, which is in development for 2025, will accelerate the company ahead of its competitors.
“We will be the world’s largest integrated designer and manufacturer of silicon in the long term,” said Gelsinger.
“It’s a tall order and I don’t expect him to achieve that,” said Rolland of Susquehanna. “But if he could stick to that schedule, it would put them, in my opinion, on par with TSM one-on-one.”
Watch the video to see CNBC’s exclusive tour inside the cleanrooms of Intel’s massive chip factory in Hillsboro, Oregon, which is slated to open early next year.