At the Intel Unleashed: Designing the Future event in late March, Intel Corporation’s (NASDAQ: INTC) New CEO Pat Gelsinger presented his plan to Intel, the IDM 2.0 strategy. The three critical elements of the strategy are:
- Commit to the IDM business model and manufacture most of the product in-house.
- Expand the use of third party foundries across the product portfolio to improve flexibility.
- Introducing the Intel Foundry Services business to compete directly in the foundry market.
The first two points were not surprising. Management has communicated its plan to increase the use of third-party foundries, such as Taiwan Semiconductor (NYSE: TSM) a few months ago.TSMC was the backup plan in the event that Intel’s effort to fix its manufacturing process failed.
The third point came as a surprise to many people, considering Intel’s current struggle in cutting edge manufacturing. The plan not only requires a large amount of additional investment for capacity, but Intel is also effectively competing with TSMC, the backup plan Intel is counting on.
We understand the enthusiasm for Intel’s plan. Not only does it remind people of Intel’s roots in semiconductor manufacturing, but it is also a patriotic movement, since Intel is the best chance of having cutting-edge semiconductor manufacturing on American soil. Yet, the move is a 180-degree turnaround for many Intel shareholders. Intel’s positive argument just a few weeks ago was for them to fully adopt the fabless model, with a focus on process design and manufacturing outsourcing to outsourced foundries.. Intel’s latest plan to aggressively pursue the foundry market puts them in a very strange position:
- Intel not only needs to compete with many of its foundry customers, but
- it also has to compete with other foundries like TSMC, on which it increasingly depends.
Well, this doesn’t seem like a very comfortable plan to us. We will see.