It Is Time To Take Intel Seriously As A Chip Foundry

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Prior to becoming the CEO of VMWare in 2012, Pat Gelsinger was a long-time Intel employee dating back to the Andy Grove era and Chief Technology Officer under Craig Barrett and Paul Otellini.

www.forbes.com/, Apr. 05, 2024 – 

It's safe to say that Intel is in his blood. But when he announced his bold IDM 2.0 plan to become a leading semiconductor foundry shortly after taking over as Intel CEO in 2021, there was reason to be skeptical. At the time, Intel had lost its leadership in semiconductor process technology struggling to bring the prior process nodes to production, and the company was facing stiffer competition in its traditional markets for PC and server processors. There is no better proof than execution and in just three short years, not only is Intel on track to meet the goals Mr. Gelsinger outlined, but Intel is starting to look like an entirely different company.

The Challenges of being an IDM

A key part of Mr. Gelsinger's strategy was IDM 2.0. For those not familiar with the term, IDM stands for Integrated Device Manufacturer, the term for semiconductor companies that both design and manufacture chips. By contrast, most of the semiconductor companies have shifted to a fabless or fab-light business model relying on semiconductor foundries and packaging companies to manufacture and complete the back-end assembly and testing of chips for some or all semiconductor products. There are still several semiconductor companies that continue to invest in or at least maintain some level of manufacturing, such as Intel, Microchip, Micron, NXP, Onsemi, Samsung, SK Hynix and Texas Instruments to name a few. Most of these companies invest in manufacturing because of the specialized nature of the manufacturing process for their products. Most companies making logic components (processors, microcontrollers, Digital Signal Processors (DSPs), Graphics Processing Units (GPUs), Field Programmable Gate Arrays (FPGAs), etc. have outsourced the manufacturing. Outsourcing significantly reduces the capital and R&D overhead by sharing the costs with other semiconductor companies through foundries like GlobalFoundries, Samsung, SMIC, TSMC and UMC. GlobalFoundries was created as the result of the spinout of AMD's manufacturing group back in 2009.

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