The Six Five team discusses Intel IFS and UMC deal.
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Transcript:
Patrick Moorhead: I really appreciate the time that we got with Stu Pann, who runs IFS, to break this deal down for us, answer some questions. Let’s go back to when Pat Gelsinger started, IDM 2.0. One part of that was, “Hey, we’re going to use external foundries more,” read: TSMC, but that they were going to stand up IFS because if you remember, when Bob Swan, prior CEO … that there seemed to be some consternation with the leadership team and the board on, “Hey, should we just punt, get out and become a designer like AMD and NVIDIA?” Then, Pat came in and doubled down, he tripled down, on building a foundry capability.
Then, we had the failed attempt, thank you, China, of Intel trying to buy Tower, which would meant they would’ve been full service, which means they could do all the way from bleeding-edge to mature nodes and specialty nodes. Then, once that Tower thing got kicked back, what was Intel’s strategy? How do they stay full service without being able to buy global foundries? Now, they’re doing partnerships. They’ve got a partnership with Tower and this news … this was a partnership with the MC.
Now, Tower was primarily specialty and, as we’ve talked about on the show many times, there’s the balkanization of foundries, which is we have the West, we have Asia and then we’ve got Western Europe, who wants that. That’s based on national security. That’s based on getting the right supply chain and therefore if you’re UMC and you don’t have fabs in the United States, how do you fulfill those, let’s say, US government? Carrier? I do believe that we are going to see beyond defense balkanization in here in the United States once IFS Columbus and Arizona gets moving, where you have to buy … for critical infrastructure, those chips have to be foundried here in the United States. Intel had availability in fabs, they had equipment that’s ready and they jointly went all in on a 12-nanometer to target mobility. Think smartphones and modems, comms infrastructure, think Cisco and networking. It’s actually a very interesting relationship here.
One of the keys here is … let’s look at TSMC as an example. 50% of TSMC’s prior quarter, as we talked about earlier in the week, the revenue is bleeding-edge and leading-edge, three-nanometer and five-nanometer. The rest is everything below that and TSMC margins … imagine when all that capital equipment is completely amortized, it’s basically printing money. Intel … that’s not necessarily their specialty, but that is UMC’s specialty. I like this arrangement and I’m really interested to see how much revenue it can drive. I didn’t see a lot of details about that, but stay tuned. Listen, time from announcing a deal to getting online takes a long time. The number was floated out there … the year was 2027, so there we go. I said three years. Sorry, I just pulled up the press release and it said 2027, so three years.
Daniel Newman: I think you covered this one pretty good. Look, it’s a market expansion. It’s a good use of capacity. It’s two companies that can benefit by partnering up. Obviously, it’s growth areas that Intel isn’t necessarily fully capitalizing on, so I look at this one, Pat, as a pretty sound move for the company. Like you said, I think the biggest thing is, while these announcements are great, it takes a while and it will be a while before this is really meaningfully accretive to the revenue and to the business, but foundry’s the long game for Intel. I’ve been saying for a while one of the biggest opportunities the company has is in foundry. With geopolitical and national security requirements in focus these past few years, I think the desire to have Intel as the national semiconductor company on the manufacturing side is somewhat visible in terms of policy decision making and, of course, investment that’s been already committed. We’ll have to see how this plays out, Pat. We’ll have to see how things change over the next few years, but I think it could be a good move. Partnerships like this can definitely work.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
