Can The New CEO Lead Intel Back To The Feast With $20 Billion To Expand Its Fab?

On March 24, Beijing time, all speculation about Intel was answered.

On the same day, pat Gelsinger, Intel's new CEO, announced a series of major changes in a public speech. First, Intel will invest about $20 billion in the ocotillo Park in Arizona to build two new fabs.

Secondly, Intel officially entered the wafer foundry industry, broke the original self-sufficient pure IDM mode, and established a new independent business unit, Intel foundry services division (IFS). At the same time, Intel will expand the production capacity of third-party OEM, which means that the competitive cooperation relationship between Intel and large OEM companies such as TSMC and Samsung will be further deepened.

In addition, new progress has been made in the 7Nm process, which has been delayed many times. Intel expects to realize the tape in of the first 7Nm client CPU (R & D code named "meteor Lake") computing chip in the second quarter of this year, but it will be more than half a year before mass production.

A senior analyst in the semiconductor industry told the 21st century economic report that in terms of the wafer plant, Intel should be planning for a process below 3 nanometers, and it will take until 2024 for the real construction to see the results.

In the current lack of core environment, expanding production has become the common choice of wafer manufacturers, now Intel will become a new player. This is Intel's ambition, and of course Intel still needs time to prove itself. From the perspective of the general background, in recent years, the policy of the United States has raised the strengthening of semiconductor manufacturing to the national strategic level. After the change of government, it has been further strengthened, especially the sudden lack of core, which also makes the governments of various countries pay more attention to the semiconductor industry chain, especially the manufacturing capacity. Intel's transformation is also in line with the current policy of the United States. As the United States increases the investment in the local integrated circuit industry, the global semiconductor industry chain will also be in a fierce turbulence game.

Intel is besieged

Looking back over the past few years, Intel has not only been challenged by AMD and arm, but also by NVIDIA and Internet giants in the field of AI and 5g. At the same time, Apple's self-developed computer chip M1 will replace Intel's CPU, which further raises doubts about Intel. What the outside world is most worried about is the delay of Intel's 10 nm and 7 nm process, which is the support of its technical strength.

For a time, intel was besieged on all sides. In the process of its market value being countered by NVIDIA, Intel has also been in the forefront of public opinion. Every once in a while, Intel's share price has been hit by a setback, which makes news headlines. Even if Intel's revenue reaches an all-time high in 2020, the market still lacks confidence in Intel.

Of course, in the semiconductor market, Intel is still strong and in the process of cloud transformation. With the cloud computing demand brought about by 5g and the Internet of things, Intel's chips have also entered the cloud. In the fields of data center and server, Intel's CPU sphere of influence is still iron clad. However, with the advent of new players, Intel has become one of the many peaks, and is further turning from C-end to b-end.

OEM business has also become the new direction of Intel's b-end business. According to the introduction, the Department is led by Dr. Randhir thakur, a senior expert in the semiconductor industry, who reports directly to Kissinger. Intel said that the IFS division differentiates from other OEM services in that it combines leading process and packaging technology, delivers committed capacity in the United States and Europe, and supports the production of X86 cores, arm and risc-v ecosystem IP to deliver world-class IP portfolios to customers.

In addition, Intel also announced a R & D cooperation plan with IBM, focusing on the next generation of logic chips and semiconductor packaging technology. Kissinger also revealed that Intel is ready to build more chip manufacturing plants in the United States, Europe or other places, which will also provide the capacity base for Intel's own product manufacturing and outsourcing.

The aforementioned analysts told reporters that in the OEM business, the competition between Intel and TSMC will mainly focus on HPC (High Performance Computing). In this regard, Intel is expected to know more about customer needs than TSMC. But the key is when Intel can catch up. In the past, everyone thought that TSMC lagged behind Intel, but later TSMC surpassed Intel. In the next generation process competition, it was not certain who would win. Especially now, the United States is also making efforts to upgrade semiconductor manufacturing.

With a huge investment of 20 billion US dollars, we can see the determination of Intel and the United States. It is reported that Intel's ocotillo Park in Chandler, Arizona, is the company's largest manufacturing plant in the United States. The four factories are connected by a mile long automated highway, forming a huge factory network. With the addition of two new factories, the competition in the desert will become more intense.

Wafer plant capacity expansion

In the semiconductor system, the IDM model represented by Intel once led the way. The full name of IDM is integrated device manufacturing, which means that the whole process from chip design to finished product is in the charge of the manufacturer. This mode can ensure the integration of product design and manufacturing. Amd founder Jerry Sanders once said in 1994, "the man who owns a fab is a real man."

However, TSMC, founded by Zhang Zhongmou, has created a new business model of third-party OEM. Since then, chip design and manufacturing can become a separate business, which greatly reduces the threshold for start-ups who want to enter the chip industry. Companies such as Qualcomm, NVIDIA and MediaTek also take advantage of the situation. Now amd plans to enter the era of 5-nanometer CPU in cooperation with TSMC.

At present, TSMC occupies half of the global wafer market, with a share of more than 50%. The second place is Samsung. In recent years, Samsung is ambitious, and its market share has gradually increased.

Now, Intel also wants to upgrade the original IDM model, not only to increase cooperation with third-party OEM, but also to invest in third-party OEM.

According to the semiconductor research office of trendforce, Intel currently outsources about 15% to 20% of non CPU IC manufacturing, mainly in TSMC and liandian. In 2021, we are going to release the core I3 CPU to 5nm of TSMC, and mass production is expected to start in the second half of the year. In addition, in the medium and long term, we also plan to contract out medium and high-level CPU products, and it is expected to start producing 3nm related products in TSMC in the second half of 2022.

In the current extremely shortage of chips, in addition to Intel to expand production capacity, TSMC and Samsung have long had huge expansion plans. In terms of finance, Intel estimates that its planned capital expenditure in 2021 will be $19 billion to $20 billion; TSMC plans to substantially increase its annual capital expenditure in 2021 to $22 billion; Samsung is more aggressive. It is reported that Samsung has set up a long-term plan of "semiconductor vision 2030" from 2021, aiming to dominate the wafer foundry market in the next 10 years.

As a new entrant to the OEM industry, Intel naturally faces challenges, including product richness, cost, service experience, process breakthrough and other aspects. However, the lack of production capacity also opens up growth opportunities for wafer factories.

In order to solve the problem of chip gap, almost all wafer factories are in overload operation. Jibang pointed out that in the first quarter of 2021, the global demand for wafer foundry market was strong. Facing the high demand for chips from terminal products, the foundry capacity continued to be in short supply. It is estimated that the total revenue of the world's top 10 foundry manufacturers will grow by 20% annually in the first quarter of this year, among which TSMC, Samsung and liandian account for the top three.

Among them, TSMC's 7Nm process has strong demand, including orders from Chaowei, NVIDIA, Qualcomm and MediaTek, and the revenue contribution of the process will grow slightly to more than 30%. In addition, affected by the increase of 5g and HPC application demand and the return of vehicle demand, it is estimated that the overall revenue of Q1 TSMC will reach a new high, with an annual increase of about 25%. Samsung, on the other hand, continues to maintain a high production capacity of 5nm and 7Nm due to increased customer demand for 5g chips, CIS, driver IC and HPC. It is estimated that Q1 revenue will increase by 11% annually.

In addition, China's SMIC international, Huahong, Yuexin, etc. are also opening up production capacity, and the competition situation of wafer foundry in the future will be more complex.

Strengthening semiconductor manufacturing in the United States

Behind the industrial changes, it is worth noting that the policy orientation of the semiconductor industry in the United States.

In fact, the United States has long been the world's leader in the semiconductor market. According to the data of prospective research institute, the United States has nearly half of the global semiconductor market share, and high R & D investment supports the rapid development of the US semiconductor industry. In 2019, the market size of the U.S. semiconductor industry accounts for 47% of the global market size, followed by South Korea, accounting for 19%, and Japan and Europe accounting for 10%.

At the same time, in the world's major semiconductor market, American companies also occupy a larger market share. In China's semiconductor market, American companies occupy 48.8% of the market share; in the Americas, American semiconductor companies occupy 43.6% of the market share; in the European market, American semiconductor companies occupy 50% of the market share.

In 2019, the U.S. semiconductor industry exports $46 billion, second only to aircraft, refined oil, crude oil and automobiles. At the same time, semiconductors are also the most exported electronic products in the United States.

Although the U.S. semiconductor industry chain is very strong, in the key manufacturing link, Taiwan's TSMC occupies the main market. With the gradual rise of science and technology industry in emerging markets such as China, the United States is strengthening its investment in the semiconductor industry at the national level.

In June 2020, the U.S. Senate proposed two new bills, namely chips for America Act and American foundries act, to promote the modernization of American semiconductor industry. Obviously, the goal is to strengthen the leadership of American semiconductor.

Among them, the U.S. wafer industry act proposes that the United States will invest a total of 25 billion US dollars in chip manufacturing industry and defense chip manufacturing industry in each state.

In February 2021, U.S. President Biden signed an executive order to conduct a 100 day review of the supply chain of semiconductor chips, high-capacity batteries for electric vehicles, rare earth minerals and pharmaceuticals, and a long-term review of six major economic sectors. Biden also said it would seek legislative funding of $37 billion to strengthen the development of the U.S. chip manufacturing industry.

With subsidies from the U.S. government, coupled with geopolitical factors, technology giants will move along with it. Before the bill was proposed, TSMC, the leading foundry of wafer foundry, announced in May 2020 that it would invest US $12 billion to build a 5-nanometer process wafer plant in Arizona, USA. The plant is planned to start construction in 2021 and complete construction in 2024. After putting into operation, it will create more than 1600 high-tech talent jobs and thousands of indirect jobs.

In June of the same year, grid core, another foundry, also announced that it had acquired 66 acres of land near New York state to expand its Fab 8 wafer plant. It is understood that Fab 8 factory is the most advanced factory of lattice core, which can manufacture chips with 14 nm and 12 nm process.

Take another look at Intel. Last year, Intel sold its NAND flash memory factory in Dalian to sk Hynix. At present, it has a packaging and testing factory in Chengdu. Next, Intel plans to invest heavily in wafer manufacturers in the United States. With the frequent actions of various countries, the global semiconductor industry chain is still constantly reshaping.