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What To Make Of Intel’s Foray Into Foundry Business

What To Make Of Intel’s Foray Into Foundry Business

  • Intel has committed $20 billion to build two new fabs in Arizona, with possible foundries in the US, Europe, and elsewhere.

Pat Gelsinger, who took on the CEO’s mantle at Intel last January, made a few important announcements at its global event– ‘Intel Unleashed: Engineering the Future. Gelsinger shared his vision for the future of Intel’s integrated device manufacturing (IDM) model. Talking about IDM 2.0, he revealed three significant plans:

  • The work on 7nm development is progressing well due to the use of extreme ultraviolet lithography (EUV). Intel now plans to tape in the compute tile for its first 7nm client (also called Meteor Lake) in the second quarter of this year.
  • Intel will expand its engagement with third-party foundries to support modular tiles manufacturing on advanced process technologies for Intel’s core computing offering for client and data centre segments from 2023.
  • Intel will establish a new business unit, the Intel Foundry Services (IFS). This standalone unit, headed by Dr Randhir Thakur, will offer a combination of leading-edge process technology and packaging. The company is aiming to become a primary provider of US and Europe based foundry capacity to meet the global demand.

Stepping Into Foundry Business

While announcing IFS, Gelsinger said Intel is primed to meet the growing demand for a sustainable and secure supply of semiconductors.

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IFS will be a fully vertical, standalone foundry business. With this, Intel aims to enter the fast-growing foundry business, which is expected to grow to a $100 billion addressable market by 2025.

“We will be differentiated from other foundry offerings with a combination of leading-edge packaging and process technology, committed capacity in the US and Europe — available for customers globally — and a world-class IP portfolio that customers can choose from, including x86 cores, graphics, media, display, AI, interconnect, fabric and other critical foundational IP along with Arm and RISC-V ecosystem IPs,” said Gelsinger.

Intel has committed $20 billion to build two new fabs in Arizona, with possible foundries in the US, Europe, and elsewhere.

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Notably, Intel recently announced a partnership with IBM to drive innovation in semiconductor technology. With this collaboration, the two companies aim to advance next-generation logic and packaging technology. 

Why Is This Move Significant?

There have been multiple reports of Intel’s decline as the market leader. The global chip shortage exacerbated the situation. In 2019, Intel apologised to personal computer makers for failing to supply chips, which had significantly slowed the PC industry. Intel, which holds about 80 percent of the market for PC chips (2019 figure), was then forced to outsource production.

Intel is at a crossroads. On the one hand, it faces increased competition from rivals such as AMD, on the other, the company has seen significant management restructuring and production delays, losing leverage to companies such as Taiwan-based TSMC.

Given the context, the newly appointed CEO Gelsinger’s announcement seems to be a step in the right direction. Intel’s intention to support semiconductor manufacturing, especially in the context of the US and Europe, is telling. “Having 80% of all supply in Asia simply isn’t a palatable manner for the world to have its view of the most critical technology,” Gelsinger said.

  • In a blog, Jeff Rittener, Chief Government Affairs Officer for Intel, wrote the new facilities at Arizona will support and bolster the US’s position as the technology leader and strengthen its national security and supply chains. The new fab facilities would create an estimated ‘3,000 permanent high-tech, high-wage jobs, over 3,000 construction jobs, and 15,000 local long-term jobs in Arizona’.

The blog also pointed out the US’s decline in semiconductor manufacturing. The company spokesperson said IFS and the recently passed Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act as part of the FY2021 National Defense Authorization Act (CHIPS) NDAA) would help fill gaps.

  • This year, the European Union outlined its ambition of having up to 20 percent of the world’s chips manufactured locally. Intel, in its communique, said it plans to increase its investment in the region and support this goal. “We have a shared ambition with the EU to deliver state-of-the-art semiconductor technology to Europe and create a more geographically balanced manufacturing capacity,” an official statement read.

Use Of Third Party Foundry Capacity

Intel will strengthen its relationship with third-party foundries for application in the communications, connectivity and graphics industries. Gelsinger said the increased engagement would give Intel the much-needed flexibility and scalability required to gain a competitive edge.

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