When Intel struggled with its 10nm process technology a few years ago, some investors suggested that the company would be better-off spinning its chip production into an independent foundry, leaving the core of the company to focus on chip design instead. Bucking these calls, however, Intel opted to keep chipmaking in-house, even going as far as to creating Intel Foundry Services to use those facilities to do contract chipmaking for other chip designers.

With the significant capital required to scale up the chip fab side of the business, it's a decision that, even today, Intel executives still get asked about. That was once again the case yesterday, at Intel's investor-focused AI Everywhere event at the Nasdaq MarketSite, where Intel CEO Pat Gelsinger reiterated that the company is not going to spin off their foundries.

"The idea of the internal foundry model, we think, is the right path for us in the current environment," Gelsinger told Reuters.

IFS is currently a distinct manufacturing operations unit within Intel that operates like 'an internal foundry', which the company then 'outsources' production of its processors and other products. Since returning to Intel, Gelsinger has been steadfast about wanting IFS to stay that way, keeping IFS an internal unit rather than to spin it off. It's a decision that's been in notable contrast to some other Intel divisions, such as Mobileye and the Programmable Solutions Group, which have been (or will be) spun off into separate businesses.

With that said, Intel will be bringing more transparency to the financials of its foundry division. Starting from Q2 next year, Intel will report financial results of IFS as if it was a separate business, which will give a clear understanding how much the unit earns and provide a better understanding of how IFS operations stack up against those of TSMC, Samsung Foundry, GlobalFoundries and other top contract chipmakers.

Ultimately, Intel believes that there are clear benefits to operating in a unified manner, especially, as explained by Gelsinger in his interview, that Intel is using the majority of the factory's capacity right now.

Source: Reuters

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  • FunBunny2 - Saturday, December 16, 2023 - link

    The problem with focusing on scale, is that it's often assumed to be a one-sided win: the more the better. But it ain't so. Fact is that capitalists, for the last couple of hundred years, have made the money from replacing humans with machines. Once the BoM has only vanishingly small amount of labour in it, generating profit from labour substitution gets dicey. Withall, the only way to get close to profit is to run said capital 24/7/365, and spit out maximum output. In order to do that, there need be sufficient demand for your widgets. Which isn't clear right these days. As the Great Depression, Great Recession, and garden variety recessions prove - it's the Demand, Stupid.

    As some wag, somewhere, pointed out a while back: many, if not most, of the embedded chips will forever live on XXnm nodes and not the Node of The Month .Xnm; where it would be too small to see with the naked eye, and a bitch to mount. I sometimes think that the Desktop World has, really, gotten there too; niches like games and AI and whatever notwithstanding.
  • StevoLincolnite - Saturday, December 16, 2023 - link

    We are at that point where fabs are more valuable than chip designers.

    Makes sense for Intel to keep it's foundries, open them up for 3rd parties and profit like TSMC does.
  • flgt - Monday, December 18, 2023 - link

    This. Recent history has shown it is easier to get a start-up going with industry leading chip design. The foundry business has a huge moat around and US government money to keep it going.
  • Samus - Sunday, December 17, 2023 - link

    Regardless of what side of the isle or agreement you are on, it's important Intel have a competitive, independents manufacturing end in the United States for if anything but national security. 90% of the worlds advanced manufacturing happens in a country that is on the verge of being invaded by a nuclear-capable neighbor, with the outcome of Ukraine as a litmus test.
  • Threska - Monday, December 18, 2023 - link

    Not really. In other words, geopolitics is complicated.

  • mode_13h - Wednesday, December 20, 2023 - link

    Maybe Pat won't spin it off, but then his successor probably will. It's a easy payday for Wall St.
  • Blastdoor - Thursday, December 21, 2023 - link

    Maybe they’ll spin off their chip design business instead. It’s kind of a technicality as to what is spun off vs retained. Whatever entity loses the name “Intel” and Gelsinger as CEO has been spun off. So maybe Intel becomes a foundry led by pat Gelsinger while “80x86 Design” becomes a new chip design firm.
  • mode_13h - Saturday, December 23, 2023 - link

    > Maybe they’ll spin off their chip design business instead. It’s kind of a technicality

    You might be right about that. It sure would be shady for him to speak on such a technicality.

    > Whatever entity loses the name “Intel”

    Oh, the design firm must keep the name "Intel". That's where 98% of the brand's value lies.

    As for the foundry business, I mean it's almost better if it drops any affiliation with Intel, since they want customers who are traditionally competitors of Intel's and constantly reminding them that they're doing business with a part of Intel won't help there.
  • Blastdoor - Sunday, December 24, 2023 - link

    I won’t comment on “brand value” other than to say Intel mostly doesn’t sell direct to consumes so I’m not sure what brand value means for them.

    But in terms of economic value and IP, I wouldn’t underestimate the value of the manufacturing tech. I think that’s more the heart of Intel than x86.
  • mode_13h - Tuesday, December 26, 2023 - link

    > Intel mostly doesn’t sell direct to consumes so I’m not sure what brand value means for them.

    Don't tell me you've never heard the phrase "Intel Inside" or seen the stickers!

    > I wouldn’t underestimate the value of the manufacturing tech.

    I'm not. I'm literally talking about the value of the name, itself. Consumers know the name Intel, and it's likely to weigh on their purchasing decisions.

    In contrast, I'm sure fab customers don't care what a fab calls itself, so long as all of the details make sense.

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