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Intel fires up internal foundry model to make its own chips

It's IDM 2.0 ... 2.0. Or perhaps this was the plan all along...

Intel has detailed plans to begin some separation between the semiconductor foundry side of its business and the design teams that create its own products. This is part of CEO Pat Gelsinger's efforts to revitalize the company with his Integrated Device Manufacturing 2.0 (IDM 2.0) strategy.

In a statement sent to all Intel employees, Gelsinger outlined the creation of an internal foundry model at the company, intended to enable Intel's chip production facilities to service external customers on a contract manufacturing basis, as well as support the company's own internal product lines.

To oversee this process, Gelsinger said he has also set up an IDM 2.0 Acceleration Office (IAO), led by the Senior Vice President of Intel's Corporate Planning Group (CPG), Stuart Pann. He takes on the role of Chief Business Transformation Officer, joining the executive leadership team and reporting to Intel's CFO, Dave Zinsner.

The IDM 2.0 strategy was outlined by Gelsinger soon after his return to Intel last year. One of the strands was that Intel needed to be more flexible, and move to making modular products that might involve working with other foundries to have them manufacture some parts of Intel products, while the other strand was to have Intel use its foundries to make chips for others.

In his statement, Gelsinger said the company had made "significant progress" on its process roadmaps and capacity as the first part of the transformation, claiming Intel was still on track to deliver five process nodes in four years, and that the company has invested in the capacity required to meet the industry's demand for semiconductors.

"The next phase of our IDM 2.0 journey requires a fundamental shift in mindset. We must embrace an internal foundry model, not only for our external customer commitments but also for our Intel product lines," he said.


Implementing an internal foundry model is likely to call for some restructuring of the company, to establishing consistent processes, systems and guardrails between Intel's business unit, design and manufacturing teams, according to Gelsinger, while putting Intel's internal product groups on a similar footing as external customers of Intel Foundry Services.

One effect of this should be that the design and the manufacturing teams can start to act like separate entities with their own profit-and-loss considerations. The business unit and design teams will be able to consider the potential impact on their margins if they want to run an additional product stepping, Gelsinger said, while the manufacturing team will be able to assess requests based on costs and impact on factory output.

"This will give us more transparency into our financial execution and will allow us to fully benchmark and drive ourselves to best-in-class foundry performance," he stated.

Contractual relationship

According to Alan Priestley, VP Analyst at Gartner, told The Reg that Intel appears to be trying to put the relationship between the chip foundry side of the business and the product side on a more formal footing.

"I read the Intel statement as meaning that it wants to create a foundry business that will serve its own internal product groups more on a commercial contract basis than before," Priestley told us.

Intel already has an Intel Foundry Services (IFS) business, but this was setup to serve external customers only, Priestley said. Gelsinger appears to want to expand this so that IFS serves both internal and external customers on the same contractual footing.

Such a partitioning between the teams is almost inevitable if Intel has serious intentions of becoming a successful contract manufacturing foundry service producing chips for other companies. It will need to allay any suspicions that its own product teams might be granted favourable access to Intel's semiconductor production lines, and will also need to assure external companies that their chip design IP will be safe in Intel's hands.

Intel already has Taiwanese outfit MediaTek, which designs processors used in smartphones and wireless communications silicon, as a customer for its foundry services. However, it was not made clear when Intel will begin manufacturing chips for MediaTek.

Earlier this year, Nvidia also said it was considering expanding its supply of chips by having some of them produced using Intel's foundry services. Typically, the GPU maker has its products manufactured by TSMC, the Taiwanese company that is currently the world's largest semiconductor contract manufacturer.

Intel's creation of an internal foundry model is also likely to raise questions about whether the company may at some point in the future decide to spin out its semiconductor manufacturing facilities as a separate concern.

"Intel could end up with two distinct blocks, one that designs chips and one that manufactures them, and if it decided to slice the company in two in future, this would allow them to do that," Priestley said.

There is no suggestion from Intel that this would ever happen, but rival processor maker AMD did this over a decade ago, which led to the creation of GlobalFoundries and saw AMD become a fabless design shop.

"Embracing an internal foundry model will enable us to deliver the competitive cost structure and predictable cadence of leadership products essential to our success," Gelsinger said in his statement. Intel will also provide regular updates on such initiatives, he added, as it strives to revitalize the company's fortunes. ®

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