It’s easier to get rich killing a company than doing good business

Intel is best thought of as two businesses, where their historical dominance in one (actually fabricating semiconductors) protected their dominance in another (designing logic chips), despite not actually being the best at that.

Intel’s fabs represented the cutting edge in semiconductor manufacturing, and their superiority in that business almost killed AMD, who just couldn’t keep up. Eventually, AMD decided they wouldn’t try to keep up with cutting edge semiconductor manufacturing, and spun off their fabs as an independent company called Global Foundries in 2009.

But Intel hit a wall in progressing in semiconductor manufacturing, and made very slow progress with a new type of transistor known as a finFET, with lots of roadblocks and challenges. The biggest delays came around Intel’s 10nm process, where they never got yields quite to where they should have been, while other foundries like Samsung and TSMC passed them up. And so their actual CPU business suffered because AMD, now a fabless chip designer, could go all in on TSMC’s more advanced processes. Plus because they were fabless, they pioneered advanced packaging for “chiplet” designs where different pieces of silicon could be connected in a way that they acted like a single chip, but where the different components could be small enough that imperfections wouldn’t hurt yield as badly, and where they could mix and match the cheap processes and the expensive processes to the part of the “chip” that actually needed the performance and precision.

Meanwhile, Apple was competing with Qualcomm and Samsung in the mobile System on a Chip (SoC) systems for phones, and developed its own silicon expertise. Eventually, they were able to scale up performance (with TSMC’s help) to make a competitive laptop chip based on the principles of their mobile chip design (and then eventually desktop chips). That allowed them to stop buying Intel chips, and switch to their own designs, manufactured by TSMC. Qualcomm is also attempting to get into the laptop/small PC market by scaling up their mobile chip designs, also manufactured by TSMC.

Intel can get things right if it catches up with or surpasses TSMC in the next paradigm of semiconductor manufacturing. The transistors are changing from finFET (where TSMC has utter dominance) to GAAFET (where Intel, TSMC, and Samsung are all jockeying for position), and are trying out backside power (where the transistor gates are powered from underneath rather than from the cluttered top side). Intel has basically gone all in on their 18A process, and in a sense it’s a bit of a clean slate in their competition with TSMC (and to a lesser degree, Samsung, and a new company out of Japan named Rapidus), and possibly even with Chinese companies like SMIC.

But there are negative external signs. Intel acknowledged that they don’t have a lot of outside customers signing up for foundry services, so they’re not exactly poaching any clients from TSMC. And if that’s happening while TSMC is making absurd profits, that must mean that those potential clients who have seen Intel’s tech under NDA might see that Intel is falling further behind from TSMC. At that point, Intel will struggle to compete on logic chips (CPUs against AMD and Apple and maybe Qualcomm, discrete GPUs against AMD and NVIDIA), if they’re all just paying TSMC to make the chips for them.

So I don’t think all of their layoffs make a ton of sense, but understand that they’re really trying to retake the lead on fabrication, with everything else a lesser priority.

They sat on their monopoly and didn’t innovate, got taken over by AMD and still didn’t innovate and instead of letting engineers do what engineers do c suite morons and execs took a bad situation and ran the company into the ground all in an effort to keep shareholders happy.

Intel’s core product became big primarily due to decisions they had nothing to do with.

Roll back the clock to IBM developing their first PC. They usually developed hardware in house, but they were late to the game and needed something fast. They choose to use off the shelf hardware, with the BIOS being the one thing that’s proprietary.

For the CPU, they could have gone with Motorola or MOS or Texas Instruments. They choose Intel. Why? Because Intel fulfilled a memory contract on another project, so sure, use their 8088.

Compaq then reverse engineers the BIOS and the whole thing pases legal muster. Now anybody can make a compatible, but they have to use the same CPU that IBM did.

Microsoft does its thing with DOS and Windows. Everyone is writing software against that. Now everyone starts getting locked in.

After that, all Intel has to do is keep x86 going well enough that nobody wants to make the effort to switch. Yes, AMD and Cyrix are out there, but at this point, they’re both the cheap alternative that isn’t as good.

They fucked up the 64-bit transition. AMD did the version we all use now.

Intel’s entire success is based on making good on a memory contract to IBM decades ago. That’s it. It hinges primarily on decisions they did not make themselves. Weren’t even in the room at the time.

From videos I watched, the big issue is them losing their market position. They took a big hit when Apple ditched them and made their own chips. Now they’re losing to AMD and Nvidia in the server space. Their newest desktop chips are under-performing. The consumer market is getting more competitive with Qualcomm joining the space and Nvidia/AMD preparing ARM chips. They made a lot of factories for producing chips but it sounds like they’re struggling to lock in a major buyer. Now they’re ejecting tens of thousands of employees in the next few months because they’re hemorrhaging money.

TL;DR they’re getting screwed from every front and either it will take them a long time to recover or they’re going to be left behind.

Semiconductor fab is an industry which takes years and tons of cash to stand up a new product line, so a failure can really set you back a ton. Intel has had a series of false starts and outright failures competing with the entire industry. They can’t match TSMC on fabs, they can’t match AMD on x86 cpus, they got stomped by ARM in portables/edge, and they can’t seem to make a dent in the GPU market. The only place where they have a small market lead is in data center cpus, but they are at serious risk of falling behind that curve if AMD wants to move to a smaller node, or if server grade ARM finally takes off.

Intel got rich on vertically integration and now they are struggling on both the fab and the IP side, which has really broken their traditional business model.

They aren’t profitable, and the great push by the previous CEO towards manufacturing was apparently not successful enough (so far I don’t think they managed to get proper clients)

Maybe i’m naive about the way businesses work; but if your still profitable, and you know you need to “catch up” why lay off people and close sites?

Precisely because you’re queuing the company up for M&A. You’re going to let the next guy do the investing and remodeling. In the meantime, Intel needs to look like a blank slate - paid down debts, no long term project costs, lots of potential for leveraged buyouts - so private equity can come in and do their thing.

Whether that means a Berkshire style business rewrite or a Bain Capital gutting and scrapping for parts, the important thing is that the investors get to project their vision of the future onto you. They’re not burdened by whatever plans the prior managers had on the table.

However for a company where RND is really where the value is, like Intel, it just doesn’t seem to make sense

When you’re on the bleeding edge, R&D is a value-add because it keeps the like-minded customers shopping from you. But when you’re lagging by a decade or more, it may be more efficient to simply strip mine your assets and narrow the focus of the business to the most profitable sectors. Intel could easily go the way of Nokia, making low cost substitutions for manufacturers who don’t want or need the high end chipsets. At the 7nm mark, Intel can just… keep making chips forever with comparatively little overhead. They don’t ever need to do better, because dishwashers and coffee machines don’t need the same kind of hardware as AI data farms or high end graphics cards.

LTT isn’t a reliable news source.

I hope they pull through. Not because of any loyalty. I’ll buy whatever is providing the best value for performance at the time. But I don’t want to see a monopoly in the x86 market.

Nvidia ate their lunch and they don’t see a way back from it.

Closing/layoffs is a quick way to turn the books black.

I think this is not then being pessimistic. It’s one of the first cases of a corporation being realistic, rather than pushing the propaganda of success till it shuts down.

They have been number 1 for a good decade or two. That means the only place they can go is down.

Maybe i’m naive about the way businesses work; but if your still profitable, and you know you need to “catch up” why lay off people and close sites?

I don’t have any internal knowledge of Intel but I can make some guesses.

There is a 1 to 2 year process pipeline that goes from ideation, to design, to prototyping, to production readiness, to recurring production. If Intel has determined that the chips they have in design and prototyping stage aren’t market viable, there’s no reason to pass them to the next steps. This means that the teams that follow (production readiness, to recurring production) won’t have work for potentially years. So why employ the extremely expensive staff that do those steps for years when they have nothing to do and you just burn money for now output?

Yet while I have no doubt that they are behind; their revenue is about 55 billion since 2023, down from the high of 78-80ish Billion during the pandemic

Business have ways move moving profit and debt around. One way is corporate bonds ( or Commercial Paper). This can give cash infusions up front to build out infrastructure or finance today’s design costs knowing that you’ll be able to take the profits from the sales of those completed products at a later date, and pay off the debt. Its possible that Intel has taken out this debt, and because they’re dumping products currently in development, they won’t have any profits to pay off the debt. I don’t know if Intel has any of these, but they are not uncommon in large companies.

However for a company where RND is really where the value is, like Intel, it just doesn’t seem to make sense; your not going to get better designs and processes by reducing your experienced staff and letting them go work for the competition.

Sure, but maybe not on all product lines. If you have 10 product lines, and 8 of them are producing products that are barely profitable (or perhaps not profitable at all), you might trim those lines, reducing your headcount to provide more R&D resources to the 2 remaining promising product lines.