Shulou(Shulou.com)11/24 Report--

As part of its recovery plan, Intel CEO Pat Kissinger (Pat Gelsinger) has launched the largest plant in the history of the chip industry, hoping to become the world's second-largest foundry by 2030. But he missed a key element: not enough paying customers.

Kissinger's recovery plan depends on his contract manufacturing project, which makes chips for other companies. He has promised Wall Street that he will start disclosing the names of these clients this year. Even one big brand can help investors justify a 47% rise in Intel's share price over the past 12 months, as Intel's sales are falling and the company's once-vaunted profit margins are narrowing.

Tuyuan Pixabay contract manufacturing program is Intel's largest strategic shift in decades. From the beginning, Intel's business model has been to design and build its own chips, such as Pentium, Cy Young and Zhiqiang, which drive computers around the world. But now Intel has lost its technological edge, leading some PC makers to switch to rival AMD products, and data center operators are even starting to design their own chips or turn to Nvidia.

Entering the contract manufacturing market is an opportunity to show the industry that Intel has regained its manufacturing strength. "in my opinion, if we are going to be big, we have to be a contract factory," said Kissinger, 62. "at present, we are winning over some customers."

Although Intel has not disclosed the list of customers in its contract manufacturing business, it has taken some preliminary steps. Ericsson has promised to produce some network chips at Intel's factories. Amazon also said it was considering using Intel factories to encapsulate chips. Qualcomm is also waiting to see Intel's chip manufacturing technology.

Now, what analysts and investors are waiting for is a flagship customer who is willing to pay in advance to guarantee supply. If, as Kissinger said, the list will be released this year, then there are less than two months left. Kissinger said one customer had already paid in advance for future supplies, but did not disclose the customer's name.

"everyone is waiting," said Stacy Rasgon, an analyst at Sanford C.Bernstein, a research firm. "but even if Intel does release the list, it will be years away from real revenue. In short, there is a long way to go."

As we all know, Intel has dominated the chip market for decades. Today, not only is the technology backward, but its revenue is lower than that of TSMC and Samsung Electronics, and its market capitalization is only a fraction of that of Nvidia.

The goal of achieving technological leadership by 2025 is based on Kissinger's plan that Intel will regain its technological lead by 2025. Intel is building plants in Arizona, Ireland, Israel and Germany as part of a comeback plan. Its biggest bet is a new factory in Ohio, which is expected to be the largest in the industry.

Obviously, this is a costly operation. Upgrading and expanding the plant wiped out Intel's profits and consumed the cash reserves that once led the industry. Kissinger also knows that it is not easy to surpass TSMC and convince potential customers of Intel's manufacturing technology.

"We know very well that TSMC and Samsung are really good at this," he said. They have been doing this for 30 years, but we only have two years, and we still have a lot to learn. " In 2021, Kissinger was ordered to return to the company as CEO after 10 years away from Intel, leading Intel to start a new round of transformation.

But on the positive side, demand for state-of-the-art chip production will only continue to grow. Moreover, customers also want to diversify their suppliers and not be too centralized.

Who will be Intel's contract manufacturing customer? So who will Intel's contract manufacturing customers be? Stacy Rasgon, an analyst at Sanford C. Bernstein, said some investors wanted Nvidia. Nvidia CEO Huang Renxun has also said that he is open to the use of Intel OEM.

AMD, Intel's longtime competitor, is also likely to become a customer, but it is highly unlikely. AMD gave up producing its own chips more than a decade ago. Like Nvidia, AMD outsourced manufacturing to TSMC. Recently, when asked about the possibility of using Intel contract manufacturing, AMD CEO Su Zifeng (Lisa Su) euphemistically said that the cooperation with TSMC was very pleasant.

Chris Caso, an analyst at research firm Wolfe Research, believes that it is easier for Intel to get customers such as Amazon, Google or Microsoft because they do not compete with Intel. But no matter which big customer, need to get Intel's assurance that there will be no mistakes in manufacturing.

"the challenge for Intel is to prove to these customers that Intel's manufacturing capacity has recovered," Chris Caso said. "after all, these customers are betting on their own business because TSMC has always been reliable."

Kissinger believes he is persuading naysayers that Intel is making a comeback. This is also confirmed by the rebound in the company's share price this year. But he also acknowledged that Intel still needs to win the support of a big customer.

"in the final analysis, it will depend on whether Nvidia, Amazon, Google, Microsoft, Qualcomm or Apple believe they can work with Intel to create better products," he said. "

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.