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The darndest things are being said about Intel. The departure of its CEO is unexplained though I heard one person say it was voluntary.
Some people think Apple will put x86 in the iPad.
Others think Apple will drop x86 from iMacs so as to unify its processors across Phone, Pad and Mac.
Sure as eggs are eggs, both can’t happen
Some think Intel is going to become a foundry in a major way starting with Apple’s business – though it’s said the production cost of an Intel wafer is 3x that of a TSMC wafer.
Others say Intel may make wafers for a few customers but will not enter an industry servicing thousands of customers with hundreds of thousands of mask-sets.
Intel is to borrow $6 billion to buy its own shares something it has been doing for some time. I am too financially unsophisticated to understand why it does this but, even before this latest borrowing, Intel’s debt was already pretty high at over $7 billion and its cash rather low – for a cash generative, capex-gobbling company – at $10.5 billion.
The divi is generous – but the purpose of the generosity is to keep the share price up, then generosity hasn’t worked – Intel’s share price is under $20, unchanged in a decade.
The strategy of getting x86 into mobile phones seems mistimed when Apple and Samsung and now LG are designing their own mobile phone processors. This morning Samsung said it will start mass-roducing its own-brand 28nm processors for mobile devices early in 2013.
Intel’s fab situation at 22nm looks tough with 50% utilisation. A $500 million charge for this is expected to be taken in Q4.
Intel’s claim to have a manufacturing advantage looks unconvincing when its 22nm process turns out to have a drawn gate length of 26nm – virtually the same as volume processes at leading foundries.
Where it matters, i.e. in the mobile market, Intel has no process advantage at all because Intel hasn’t yet put its mobile SOCs on its latest process at the start of a node. Intel’s mobile SOCs won’t enjoy early access to a new process node until the 14nm generation.
And was finfet the right bet? 20nm planar may still be made to work, while FD-SOI could turn out to be a better route than finfet.
Meanwhile CEO Paul Otellini won the 2012 Open-Mouth-Insert-Foot Award by some spectacular boo-boos:
Saying Windows 8 wasn’t ready just before its launch, provoked Microsoft’s riposte that Intel’s power management software wasn’t ready for the launch of Surface, Microsoft’s Windows 8 tablet.
And endorsing Governor Mitt Romney in the recent US presidential elections probably irked the White House just as Otellini was earning some brownie points by sitting on a Presidential committee. They were much needed brownie points after Intel’s pasting from the FTC for ‘stifling innovation.’
And all the while and worst of all, the PC industry starts to contract and Intel has won few slots in the successor to the PC industry – the mobile device industry.
All in all a pretty rotten year for Intel despite taking in over $50 million in revenues and earning over $12 billion in profits.
Even silver linings can have clouds.
They’re so clever these financial types aren’t they EN? They borrow $6bn to support a 4.5% divi and that keeps investors happy. But, Intel’s shares have fallen 20% in 6 months which means investors, led by Warren Buffett, aren’t happy because they’ve been selling their shares. Of course, if Intel hadn’t paid the 4.5% divi the shares would have fallen more. So it’s worth borrowing the $6bn to support the divi and it’ll be worth borrowing another $6bn to support the divi next year. To financial types debt is always the answer. Sharp will tell you it isn’t. And I love companies’ techie roadmaps which are always predicated on the assumption that their own product will keep getting better while their competitor’s product stays the same.
Intel is issuing bonds to buy back their stock. Doing this is financially worth while because they can borrow at a rate that is lower than their 4.5% dividend. In essence, they will be saving expenditures by paying the interest on the bonds rather than the higher dividend on the shares that no longer exist.
As for power efficiency, the overhead for x86 is somewhere around 2% and is shrinking every generation as the architectures become more sophisticated. There is a reason why the ATOM RAZR-I has better battery life than the Snapdragon RAZR-M. It is because Intel is already ahead of the industry in power efficient process technology. When they update that 5 year old architecture and get it caught up to their latest process rather than 2 years behind, most ARM processor producers will find themselves in the same part of the smartphone market that AMD is in for computers, the low margin cheap models.
Intel power consumption might be reasonable but is not good. And their problems are on two different levels. First of all the CPU carries a lot of baggage that is there for backwards compatibility that hardly anyone uses these days, like 8087 maths. This in turn costs chip area and instruction coding complexities and both in turn costs power. Secondly I hear the Intel peripheral chipsets are too power hungry and Intel has a long way to go before catching up with ARM and licensees such as Energy Micro.
Backwards compatibility has a place but Intel has taken it over to dogma, an issue that to me smells of intellectual stagnation. It is a red flag that it was AMD with their 64bit version was first and also used it as an opportunity to drop baggage. Intel shold have led; they lagged. Intel had another opportunity to drop baggage with the Centrino portable chips where power consumption was an issue.
My conclusion then is that the power issue is a result of stagnation at Intel. Sure, their silicon skills are world class and defining but they have not renewed themselves the way they should have.
Very true, Aristotle, the ‘x86 everywhere’ initiative just doesn’t make sense in mobile.
I thought the phones that do come with “Intel Inside” were pretty reasonable for power consumption. The problem for Intel isn’t so much power, it’s more that they are so late and the “standard” is ARM based and not x86. Lack of LTE solution for N America is a problem. I also wonder how strong the desire is within Intel – volumes are large and margins are smaller than Intel are used to, they’d be gambling a huge amount of capital for capacity with high risk of little/no return.
Intel chirps on about the advantages of x86 being a long established standard – both in terms of legacy code and expertise. That is true for the PC platform, but a new standard has emerged for the mobile world. I can’t think I’ll be using Lotus 1-2-3 on my IPhone!
I’ll wager that any success for Intel in phones will require ARM based product – either under a foundry arrangement or with Intel resurrecting its ARM license. Unlikely. Atom might succeed in Windows8 tablets.
The PC and server market is not dead and Intel will continue to mint it, but further growth will be the problem.
Greg – which plant is that?
Couldn’t agree with you more greg, The two CEOs since Grove have been managers not leaders. They’ve kept to the same course for the good ship Intel even as she took on water and sprang a few leaks when a leader would have charted a new course. This, I think, is Intel’s Lou Gerstner moment – the moment when IBM realised it needed leadership and new direction and it got hold of Gerstner from RJR Nabisco, and Gerstner turned IBM into the powerhouse it is today.
Yes SEPAM, I thnk that one was a rather mischievous rumour.
It would be strange of Apple to leave ARM before they have tried the new 64 bit ARM architecture. A portable computer with an Intel chip would require huge batteries and a diesel powered generator to be useful and could not be considered portable unless you were built like Arnold Schwarzenegger.
Anyway even ARM is getting old, 30 years of new knowledge since then should make for an even better architecture.
If apple want to win in the long term against Arm based androids, they may need Intel.
I find it extremely difficult to bet against intel while Andy Grove is still alive, kind of like betting against Bill and Dave. After he’s gone though it will be a different story.
Having said that they do appear in a slump. They are supposed to be building a new plant near me but I drive past it every week and nothing seems to be happening for this past year. Cranes are always in the same spot.