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8th Gen Intel Core S-series Die

Intel's determination to fire CEO Brian Krzanich for his determination to appoint in a consensual violation of company policy has sparked a raft of think pieces on the topic, including those revisiting Intel's electric current market position and its relative strength against companies like Qualcomm and AMD. I statement making the rounds is that Intel'southward continued insistence on primarily manufacturing its own fries is causing problems for the company. Only is information technology truthful?

First, let me say this: I don't think it's crazy to see a link betwixt Intel's recent announcement that information technology would delay 10nm into 2022 — possibly even the back half of 2022 — and Krzanich's dismissal. I have absolutely no inside information on this topic, and it's possible that Intel would've let Krzanich go even if 10nm had executed flawlessly. Only 10nm didn't execute flawlessly, and that failure is going to have consequences. Is focusing on manufacturing fries for other people the answer for Intel? I'm not certain.

I desire to make it articulate that I'm drawing a distinction between Intel'due south failure to adapt its own manufacturing model to the needs of the lower-cost mobile marketplace and the question of whether Intel should try to serve every bit a general purpose foundry for other manufacturers. We've previously discussed how Intel was unwilling to modify its fabs to compete with TSMC on toll and manufacturing techniques, and pursued a strategy that kept Atom's prices higher and forced the company to send hardware contra-revenue. At that place's no incertitude that the company failed in its efforts to enter the mobile market.

But the argument that Intel should be trying to build chips for other companies falls a flake flat when you lot consider the reasons why so-called "pure play" foundries exist — specifically, they exist because in the past, before TSMC was founded, trying to buy capacity at IDMs (integrated device manufacturers) that built primarily for themselves raised existent questions of conflict of interest, and whether your partner might attempt to take reward of IP yous shared with them for manufacturing purposes. The fact that this system didn't work so well is why TSMC and later foundries enjoyed tremendous success for decades.

Stratechery

Image by Stratechery

The statement that Intel'due south integration has become harmful is laid out in an excellent article at Stratechery, only the basics of information technology are this: Intel faces contest from the remaining pure-play foundries — GlobalFoundries, Samsung, and TSMC. The success of those foundries in moving to 7nm while Intel struggles with 10nm is evidence that Intel has been outmaneuvered by these three companies, who are pushing into new markets while Intel struggles. Its 10nm node is delayed. It canceled its Knights Loma Xeon Phi bit. It's working on new GPUs to replace the technology that has largely stagnated since Skylake, and its returned to the 14nm well to once again attempt to wring fresh performance out of its cores, all while companies similar ARM are moving ahead with chips like the Cortex-A76.

These events definitely represent a threat to x86 and Intel. But there are some historical factors to continue in mind too.

Don't Count Intel Out

Back in 2005 Intel looked like a bad joke. From 2000 to 2005, Intel saw its chipset market share sag as VIA took a huge chunk of the Pentium 3 chipset market. Its endeavour to dominate the retentiveness industry with RDRAM and a Rambus partnership blew upward in spectacular fashion. The original Willamette Pentium 4 was worthless, and while Northwood blew the doors off AMD, Prescott promptly appeared and demonstrated that all the P4 critics were right — it just took a few years for the rotten fruit of the Netburst architecture to truly show its colors.

When dual-core Pentium four'southward finally launched, they looked wretched next to AMD's dual-cadre Athlon 64 X2'southward. For the offset time, in every benchmark suite or category 1 could name, AMD could merits the performance crown. Outside of a bare handful of specific applications, there were no tests where the Pentium 4 Smithfield won. As ExtremeTech wrote at the time:

We're more concerned with existent applications, and when information technology comes to those, we have a hard fourth dimension finding any situation where a dual-core Pentium comes out ahead of a dual-cadre Athlon 64. Even in near single-threaded apps, AMD takes the cake. Games are an absolute accident-out, with the Athlon 64 X2 handily outstripping even a liquid-cooled Extreme Edition dual-core Pentium overclocked by 25 percent. And it's not merely games: The X2 shell the massively overclocked Pentium in DivX encoding and LightWave rendering, and basically tied it on the 3ds max SPEC APC examination.

Some of the aforementioned gaming results from 2005. The P4'due south hither are all Prescott-based. The P4 Farthermost Edition is dual-core + HT.

Fourteen months afterwards, Intel launched the Core two family and dominated the PC industry for the next 11 years, until the launch of Ryzen.  These comparisons and issues can modify, and they tin can change on a dime.

Silicon Scaling, Server Strategies

The other major cistron that plays into this situation is the question of whether anyone tin observe meaningful ways to accelerate performance past anyone else as the keen silicon scaling train slowly winds downwards. We've already discussed a bevy of problems facing the industry at 3nm. EUV integration continues, only in that location'due south a certain amount of "We'll fix it in mail" thinking powering that endeavour. Increasingly, the time to come of silicon looks like one in which every ISA, architecture, and arroyo to building CPUs winds up stuck on the same performance and power curve, with only minor differentiation betwixt them. If this happens, the scales could tilt even more than against Intel — if all silicon is the aforementioned, and price becomes the only differentiator, you lot can bet companies volition swiftly standardize on price.

For now, x86 can avoid this fate past leaning on the mother of all vendor optimization strategies. Windows may offer some x86 emulation to entice buyers towards low-end Snapdragon 835 systems, but nobody looks at those systems and thinks they're competitors for the x86 consumer systems that Intel sells. At the aforementioned fourth dimension, announcements like the Snapdragon 850 and Snapdragon 1000 are evidence that Intel could confront contest higher upward in the production stack in 2022 and beyond. Only just as Intel's strategy for AMD once involved giving the visitor the lowest-end of the consumer marketplace and constraining it from everything else, the house seems to have a plan for dealing with ARM's potential encroachment into the consumer space — by focusing on other markets.

Talking about ARM's threat to Intel in the consumer infinite feels a fleck like arguing over a decision that'south already been made. Intel took consumer PCs out of its own core concern pillars. Microsoft has reorganized Windows as 1 component of Azure. It's articulate that the WinTel Alliance no longer views consumer hardware equally its own primary play. Instead, both Microsoft and Intel are moving towards servers, data centers, cloud computing, and other endeavors.

Intel-Q1-Results

The higher up is Intel's Q1 2022 operating income. Client computing nonetheless accounts for the largest acquirement share, with $8.2B in sales and $2.7B in profits for an operating margin of 34 percent. Data centers accounted for just $5.2B in acquirement merely $ii.6B in profits, for an operating margin of l per centum. But Intel CCG operating acquirement fell by $240M in Q1 2022 compared with the twelvemonth previous. The reason nobody really noticed is considering data center operating income rose by $1.15B at the same fourth dimension, alongside IoT (operating income up 2.16x).

A glance at the operating income canvass tells the story of where Intel believes its futurity lies, and it isn't in consumer hardware. It's servers, data centers, the IoT, and non-volatile solutions like Optane (which Intel is working to integrate into systems every bit a must-have feature, fifty-fifty when we strongly disagree with that messaging). Far from moving to open its fabs upwards, Intel is working to attract new customers less afflicted by chip commoditization trends. The company's attempts to win customers on the foundry side simply haven't enjoyed that much success; after a prominent annunciation nigh LG as a customer for 10nm, we haven't heard more than from Intel on this side of the business. If Intel was enjoying much success in attracting foundry customers, we'd take heard about it already.

Information technology's possible that Intel's fabs and investment in its own integration represent a kind of straitjacket that the company now struggles to escape. Just brusque of selling its own fabs, spinning them off into their own visitor, or edifice all-new facilities intended to compete with the Samsung, GF, and TSMC'due south of the world, it's non articulate what Intel can do to meaningfully address this trouble. It doesn't seem to have attracted more customers to its existing foundry efforts and it bought Altera, it's one major customer. Rather than divest of its own foundries, Intel appears to have taken a different tack, and is focusing on winning space and business in markets where higher costs are more accustomed and firms are willing to pay premiums for advanced products and features.

Despite the failure of its manufacturing segmentation to deliver 10nm, Intel withal builds the nigh complex microprocessors on the planet with the highest number of transistors and cores integrated into a single monolithic block of silicon. That expertise is worth tens of billions of dollars to Intel, and it'southward understandable that they're loathe to tear up a business model that's worked so successfully for over xxx years. Merely I suspect Intel's reply to the integration trouble some accept observed is precisely the pivot to information middle and certain segments of IoT where information technology hopes to compete in new, less commoditized spaces, thereby spinning its expertise in design into products other companies can't match. That could well turn out to exist the wrong reply — but information technology is an answer.