Intel expects to regain market share by 2024, admits to 'inefficiency in the fab'
Plus: CFO says Chips ACT cash might continue because US govt will be competing with Asia
Intel's CFO has admitted to certain "inefficiency in the fab" that is logical when "you're a monopoly" but "just doesn't make sense anymore," as he looks to carve out billions in overheads from the chip maker.
At the same time, David Zinser, who joined Intel in January after being the finance boss at Micron, also claimed his latest employer is in a better position to regain server market share as it prepares for upcoming product launches and investments in new fabs. And he hinted the US government may have to extend CHIPS Act funding if it hopes to be competitive against Asian chip rivals.
Speaking at the UBS 50th Global TMT Conference in New York this week, Intel executive VP and CFO David Zinsner told attendees that the chip giant is now in "a pretty good position" with respect to Sapphire Rapids, the much delayed next generation of its Xeon Scalable server processors, which was originally slated for introduction in 2021.
I've heard statistics of... uptimes on certain pieces of equipment that were 20 percent for us, and when you look at the best in class, it's 80 percent uptime for that piece of equipment
"Now that does not mean we'll gain share yet. It's a good product in certain workloads. It's not a good product in every workload. But I think it sets and establishes the execution that we expect to see when we bring out Emerald Rapids," Zinsner said, referring to a successor chip, due next year, which will fit the same socket as Sapphire Rapids but promises a boost in memory and overall performance.
However, it will not be until 2024 when Intel expects to re-establish itself in the datacenter, according to Zinsner. This is when it aims to deliver a power-efficient product, Sierra Forest, along with Granite Rapids, a follow-on chip to Emerald Rapids.
"We're in a strong position on the datacenter side [in 2024]. We start to see the share erosion start to dissipate and actually turn around in the other direction," he said.
Zinsner claimed Intel was also gaining share in its networking and graphics businesses. "We've got a lot of work to do to get the product portfolio into a competitive position," he said, referring to graphics, "but I think I like our progress so far in terms of how we've executed."
Meanwhile, Intel is also seeing progress on customer engagement with its foundry business, which the company is in the process of revamping in order to make more money from contract manufacturing silicon for third parties.
Earlier this year, Intel disclosed it had won business from Taiwanese chip company MediaTek, making it the first major silicon customer for its foundry services.
"I think you'll start to see as we progress into '23, more customer announcements that show that we have a real strength in the foundry space," Zinsner said.
'What we've optimized to, that made a ton of sense when you're a monopoly, it just doesn't make sense anymore'
Intel is also looking to shake up the manufacturing side of its own products to be on more of a commercial contract basis than before, and Zinsner shed some very interesting light on this in remarks about the efficiency of Intel's fabrication facilities.
"When you look at how we're structured now, the product area can whip the manufacturing organization around quite a bit: they can do as many hot lots as they want. They can do as many samples as they want. They can do as many steppings as they want. They can change their forecast pretty much every week if they wanted to do that," Zinsner said.
"So there is a ton of inefficiency in the fab just by virtue of the way it's been structured and what we've optimized to, that made a ton of sense when you're a monopoly, it just doesn't make sense anymore," he added.
"I've heard statistics of, like, uptimes on certain pieces of equipment that were 20 percent for us, and when you look at the best in class, it's 80 percent uptime for that piece of equipment," Zinsner told the audience.
This did not matter so much in the past when Intel was always converting over to new production nodes so quickly, Zinsner said, but that will likely change.
"Now that we plan to extend them hopefully, to 10 or 15 years, it makes a ton of sense to go drive that efficiency," he explained.
Intel intends to reduce costs by $3bn in its 2023.
In response to a query about Intel's decision to start building two new manufacturing facilities outside of Columbus, Ohio this year, Zinsner said that it came down to a location that had the right mix of attributes the company was looking for.
"We looked for a location that we felt like had the right level of water, had the right infrastructure, and had a good set of universities around it so we could attract talent, was in a state where the government was highly supportive, educating and training the workforce," he explained.
Obviously, incentives played a factor in it, Zinsner said.
"I think the level of engagement from Ohio was pretty unmatched relative to any other states that we were looking at for that greenfield fab. We're also expanding in Arizona, and we have a facility that we're going to expand into in Germany. I think we got the same kind of vibe from the German government in terms of their level of interest and support, and so that's what drove most of the decision-making," he added.
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Zinsner also defended Intel taking money from the US government via the CHIPS Act, in response to a question asking whether investors might see that as the company being too dependent on government money to be competitive.
"I guarantee you every [other semiconductor company] gets grant money," he said. "That happens in Asia, believe me. So everyone is already getting grant money outside of the US and Europe," he said.
"The CHIPS money is projects, it's a project based thing that will extend beyond four to five years, but there's a limit to the time frame of the project. And as we are looking at the cost structure of those fabs and whether we can make it work from a cost competitive perspective, we're assuming this, but we're not assuming anything beyond this," Zinsner explained, adding that he hoped the funding would continue beyond this timeframe.
"I'm hopeful that actually they will because I think in order to be competitive with Asia, it will need to continue," he said, "But I'm not too worried about it right now. I think we are in a position where we do have a competitive cost structure relative to Asia and that I think we can be pretty effective, as a foundry supplier and as a manufacturer of wafers in the US and Europe." ®