Will Intel Corp skip the ticket next time?

The key to Intel Corp's return to the top is whether he can regain the dominance of the process.

Recently, a major event has happened in the chip industry.

The market capitalization of AMD has once again surpassed that of Intel Corp.

Intel Corp CEO Pat Kissinger admitted that the stock price is to blame for the fall, and the stock price should indeed fall!

How did the once strongest chip enterprises decline step by step?

01 fell off the throne

Intel Corp was once the king of the chip industry, which should be indisputable.

From the perspective of technological pioneers, Moore's Law, which has a profound impact on the development of the industry today, comes from Gordon Moore, one of the founders of Intel Corp.

From the perspective of leading the industry, the "Wintel" alliance formed by Intel Corp and Microsoft Corp has dominated and promoted the global PC market since the 1980s.

As early as 1992, Intel Corp has become the world's largest semiconductor supplier.

At that time, Intel Corp would not be looking at AMD.

Although, like Intel Corp, the founder of AMD is also from Fairchild Semiconductor.

However, since its inception, AMD has been beaten by Intel Corp.

In order to avoid the edge of Intel, AMD chooses low-cost and affordable middle-and low-grade chipsets to survive with "cost-effective".

Founder of Fairchild Semiconductor

Many people in the chip industry believe that Intel Corp is fully capable of killing AMD, and the reason why he did not do so is to cultivate a less powerful opponent and avoid the trouble of antitrust.

Even with Intel Corp's mercy, AMD almost went bankrupt in 2014.

Today, let's take a look at these two opponents. AMD is booming, but Intel Corp has fallen off the throne.

One of the hallmarks is market capitalization. In February this year, AMD surpassed Intel Corp for the first time in its history.

Just two days ago, AMD's market capitalization once again surpassed that of Intel Corp.

Now look again, the market capitalization of AMD exceeds Intel Corp's more than 20 billion US dollars, the gap between the two begins to widen.

Comparison of market capitalization

It may be accidental to exceed it once or twice, and there is an inevitable reason for the widening gap.

The old opponent once could only look at his own back, but now he is in front of him. No wonder Intel Corp CEO has said disheartened words.

Intel Corp's decline is even more apparent if you compare today's stock price with 2016.

In 2016, Intel Corp's share price was $31; now it is $36. Exactly six years later, the growth rate is only 16%.

In contrast, AMD's share price rose more than 40-fold from $2.20 to $102.

Comparison of stock price trend

The investors who invested in Intel Corp felt cold at heart.

The stock price is "face-saving", "Li Zi" is a revenue problem.

Intel Corp reported revenue of $15.3 billion in the second quarter of 2022, down 22% from a year earlier. It turned from profit to loss, with a net loss of $500m in the quarter, compared with a profit of $5.1 billion in the same period last year.

In addition, Intel Corp lowered his full-year performance forecast to forecast revenue of $6.5 billion to $68 billion in 2022.

You know, four years ago, Intel Corp's revenue exceeded 70 billion US dollars.

Intel Corp's revenue growth trend

If you look at competitor AMD, revenue in the second quarter increased by 70% compared with the same period last year, and net profit soared by 119%.

Over the past four years, AMD's revenue has tripled.

AMD revenue growth trend

As the saying goes, one will decline and the other will grow.

In a sense, Intel Corp's "cake" was taken away by AMD.

Another observable perspective is PC's market share, which continues to grow to 30%, an all-time high.

Comparison of market share between AMD and Intel Corp

At one point, Intel Corp controlled 99% of the market share in the server chip market.

Now, AMD has taken 15% of the market share.

JPMorgan Chase & Co even predicts that AMD's market share will increase to 40 per cent in the future.

In recent years, the global supply of chips exceeds the demand.

Intel Corp, the former king, did not increase but decrease in revenue, and did not even get any soup.

The era of 02 has changed.

"We are prisoners of our own success. "

Yoma Ollila, former chairman and CEO of Nokia, once commented on Nokia's performance in response to new opportunities.

This sentence is also very appropriate for today's Intel Corp.

If you sit on the throne for a long time, you will often lose your sense of suffering.

As the saying goes, it is difficult to make a U-turn.

It is too difficult for a giant ship like Intel Corp to change course and sail into unfamiliar territory.

In particular, times have changed.

Around 2010, the popularity of smartphones and tablets began to impact the PC market.

In 2021, 340 million PC units will be shipped worldwide.

It looks like a lot, but you know, 10 years ago, global PC shipments exceeded 350 million.

Global PC shipments over the years

PC business is Intel Corp's main source of income, the market shrinking, naturally affected its revenue.

For example, Intel Corp's PC revenue fell 25% in the second quarter of 2022, becoming a major drag on overall performance.

In the face of the surging era of mobile Internet, Intel Corp swayed around and did not resolutely transfer the production line to the manufacture of mobile phone chips.

It was not easy to get on Apple Inc's express train. Intel Corp once ranked among the top three in the world in market share, but he was eliminated by Apple Inc because of poor baseband signals and slow network speed.

In July 2019, Intel Corp announced that he would sell 5G baseband business to Apple Inc, which was tantamount to abandoning the mobile platform.

External worries are rising again and again, and internal troubles are rising gradually: in the face of the increasingly voluminous chip industry, Intel Corp's business model has also become outdated.

Intel Corp's business model, referred to as "one-stop", that is, self-design, self-manufacturing, self-packaging, all the work, all done by yourself.

Ten years ago, there would have been no problem with this model.

Because Intel Corp leads the development of the industry, technology, scientific research, capital and equipment are all top-notch in the industry. On the contrary, "through-train" can protect technology and build a solid moat.

The rise of Taiwan Semiconductor Manufacturing Co Ltd changed the rules of the industry.

Taiwan Semiconductor Manufacturing Co Ltd, who focuses on generation processing, achieves the extreme of contract manufacturing technology and achieves the lead in the manufacturing process.

Global market share of chip foundry in 2021

For example, Taiwan Semiconductor Manufacturing Co Ltd and Samsung's 7nm process was mass-produced as early as 2018, and Samsung's 3nm has been mass-produced this year.

In contrast, Intel Corp, the release of the 7nm process was postponed to the second half of 2022 or early 2023, which was ridiculed as a "toothpaste factory".

It can be said that only the manufacturing process, Intel Corp lags behind Taiwan Semiconductor Manufacturing Co Ltd and Samsung.

The manufacturing process directly determines the performance of the chip and ultimately affects the sales volume.

AMD did not have the ability to make it, so it was simply handed over to Taiwan Semiconductor Manufacturing Co Ltd to produce it, while he concentrated on the design.

As early as 2018, AMD released its desktop CPU based on Taiwan Semiconductor Manufacturing Co Ltd 7nm process, which has better performance than the same level of Intel Corp chip and has an advantage in pricing.

Four years later, the 7nm CPU made by Intel Corp arrived late and was jokingly called "squeezing toothpaste".

Comparison of processes among Intel Corp, Taiwan Semiconductor Manufacturing Co Ltd and Samsung

The division of labor in the chip industry is becoming more and more refined.

For example, Taiwan Semiconductor Manufacturing Co Ltd invests tens of billions of dollars a year just to stumble on the manufacturing process.

Although Intel Corp is rich, the stall is too big, and it is not realistic for Taiwan Semiconductor Manufacturing Co Ltd to devote himself to the R & D process like this.

How can Intel Corp be invincible if he fights against the whole industry on his own?

Products are not competitive, there is no breakthrough in technology, and decline is inevitable.

03 can you get back to the top?

Since its establishment in 1968, Intel Corp has experienced strong winds and waves and experienced ups and downs several times.

This time, Intel Corp is also adjusting his strategy:

The first is to launch the IDM2.0 mode.

To put it simply, it is to learn from Taiwan Semiconductor Manufacturing Co Ltd and Samsung to undertake chip foundry business.

Prior to this, Intel Corp also decided to spend 20 billion US dollars to build two new chip factories to greatly expand its manufacturing capacity.

Intel Corp factory

The second is to hold Taiwan Semiconductor Manufacturing Co Ltd's thigh.

Intel Corp's 14th generation CPU "Meteor Lake" is manufactured using its own Intel 4 (7nm) process.

In order to avoid technical uncertainty and delay in production and release, Intel Corp has decided to use Taiwan Semiconductor Manufacturing Co Ltd 5nm process to make part of it.

The former king had no choice but to seek help from others.

The third is to adjust the product direction.

The Internet of things and artificial intelligence are in the ascendant, and the demand for GPU is strong.

Intel Corp decided to increase GPU product research and development in order to obtain new economic growth points.

So the question is, can Intel Corp get out of the trough and create resplendence?

In my opinion, it's not that easy.

From an external point of view, whether it is engaged in contract manufacturing or pushing GPU, Intel Corp is faced with top competitors like Taiwan Semiconductor Manufacturing Co Ltd and NVIDIA Corp, and the competition is very fierce.

From an internal point of view, Intel Corp has developed for decades and has formed path dependence. It takes time to change identity and adjust products.

Intel Corp is in decline, and the core problem is to lose the dominance of Moore's law.

The key to Intel Corp's return to the top is whether he can regain the dominance of the manufacturing process.

On June 30 this year, Taiwan Semiconductor Manufacturing Co Ltd announced "mass production of 3nm in the second half of the year", followed by Samsung to announce mass production of 3nm.

For the more advanced 2nm process chips, Taiwan Semiconductor Manufacturing Co Ltd plans to start mass production in 2024 and Samsung plans to start mass production in 2025.

As the saying goes, one step at a time.

Taiwan Semiconductor Manufacturing Co Ltd and Samsung run so fast that Intel Corp, who lags behind, is not easy to catch up in a short time.

More realistically, will Intel Corp still "jump the ticket" next time?