Asia beat US, EU in chip building because the West didn't invest, Intel CEO claims
(2024/01/18)
- Reference: 1705566854
- News link: https://www.theregister.co.uk/2024/01/18/chips_davos_intel/
- Source link:
The COVID-19 pandemic was a decisive factor in Intel’s decision to re-emphasize its own manufacturing prowess, after decades in which US and European nations failed to recognize the importance of the semiconductor industry and allowed Taiwan and Korea to become global leaders, Intel CEO Pat Gelsinger told World Economic Forum chair Klaus Schwab in Davos on Wednesday.
"Never was a vote taken in Brussels or DC to get rid of this industry," he said "But there were votes taken in the Asias — countries like Korea, Taiwan, and China — to get this industry. They put in place long-term industrial policy, tax investment, etcetera, to attract this industry and 30 years later, they attracted the industry."
Gelsinger is of course referring to foundry giants TSMC and Samsung, which produce the majority of leading-edge semiconductors sold today. The Taiwanese and Korean outfits will be Intel's largest competitors as the US manufacturer ramps up its Foundry Services business over the next few years.
[1]
Gelsinger [2]argued that the West's failure was focusing on high-margin aspects of the industry, like the design of chips, and neglecting then offshoring low-margin aspects, such as manufacturing.
[3]
[4]
"We were on the hair's edge of never being able to recover the manufacturing of this industry," he said. "Had I started the rebuilding of Intel a year later, I don't think I could have accomplished it."
This comment is particularly interesting as shortly before the ousting of former CEO Bob Swan and Gelsinger's return to Intel, the chip giant was [5]facing pressure from investors to transition more of its production portfolio to outsourced foundries like TSMC.
[6]
That pressure came after Swan [7]admitted that Intel's 7nm manufacturing process — now called Intel 4 and Intel 3 — was woefully behind schedule.
Gelsinger thinks that outsourcing push may have succeeded, were it not for the COVID-19 pandemic and the supply chain chaos that followed.
"We all woke up and we realized, 'oh my gosh, what happened, 30 years of industrial policy and we lost something so critical to our future'," he said. "The world needs balanced, resilient supply chains, and that's what created the environment for the US and the EU CHIPS Act."
Gelsinger: This biz isn't cheap, you know
Intel hopes to walk away from the negotiating table with a sizable chunk of CHIPS funds in both the US and EU (and [8]some from Israel).
It has already announced six fabrication plant projects, a couple in Arizona plus facilities in Ohio, Magdeburg, Germany, and Kiryat Gat, Israel. Yet, while the US Commerce Department has announced funding allotments to the likes of BAE and Microchip, Intel is waiting for its share of the cash.
[9]
Valued at $53 billion and €43 billion, respectively, US and EU CHIPS Acts are critical to achieving the goal of ensuring local manufacturing, Gelsinger explained, as producing semiconductors isn't cheap or easy.
Looking at the US CHIPS and Science Act, we [10]estimate Intel could walk away with between $2.5 billion to $7.5 billion in funding and tax incentives over time. While those are big numbers, even the larger sum would not completely cover the costs to build a single fab, never mind the six Intel is developing.
[11]Israel to plow $3.2B into $25B Intel fab project
[12]NVMe consortium polishes its specs to support computational storage
[13]Nvidia readies downgraded chips for China, but will anyone want to buy them?
[14]Microchip nabs $162M to keep chips for washing machines – and missiles – flowing
Gelsinger therefore expects a second round of CHIPS funding will emerge.
"I do believe they'll need to be a CHIPS Two, at some point, to continue building those policy decisions," he said.
The extreme cost associated with semiconductor manufacturing is one of the reasons Gelsinger gave for why the US and Europe have fallen behind Taiwan and South Korea.
"If you want to be a cutting-edge semiconductor supplier, you just need to invest $20-$30 billion of capital per year, you need to invest $8 to $10 billion of R&D per year, and you need to do that for 30 years," he said. "There's only three companies in the world that are capable of doing these cutting-edge chips: TSMC, Samsung, and Intel."
China’s lost decade
While Gelsinger remains confident that Intel will be able to compete against TSMC and Samsung, the one country he doesn't appear to be worried about is China.
The Intel chief predicts that China will likely disrupt the market for mature nodes. But, when it comes to leading edge process tech, Gelsinger wagers that China is at least a decade behind the rest of the industry.
The export [15]policies put in place by the US, the Netherlands, and Japan have put a floor for semiconductor production in China at between 10 and 7 nanometers, he opined. "I think this is a ten-year gap, and I think it's sustainable ten-year gap."
Last year we learned that China's state-backed Semiconductor Manufacturing Internal Co. (SMIC) had begun [16]producing 7nm chips for Huawei. Pundits previously believed the most advanced chips SMIC could manage used a 14nm process.
More recently, rumors began to fly that China had managed to produce an even more advanced 5nm part for Huawei's Qingyun L540 notebook. But as it [17]turned out , the machine uses stockpiled TSMC silicon from 2020. ®
Get our [18]Tech Resources
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[2] https://www.weforum.org/events/world-economic-forum-annual-meeting-2024/sessions/a-conversation-with-pat-gelsinger-and-klaus-schwab/?linkId=100000236116995
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
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[5] https://www.reuters.com/article/us-intel-thirdpoint-exclusive/exclusive-hedge-fund-third-point-urges-intel-to-explore-deal-options-idUSKBN2931PS
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2020/07/24/intel_7nm_chip_slip/
[8] https://www.theregister.com/2023/12/27/intel_israel_fab/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2023/02/28/us_chips_conditions/
[11] https://www.theregister.com/2023/12/27/intel_israel_fab/
[12] https://www.theregister.com/2024/01/17/nvme_specs_get_an_update/
[13] https://www.theregister.com/2024/01/08/nvidia_china_chips/
[14] https://www.theregister.com/2024/01/04/microchip_nabs_162m_to_keep/
[15] https://www.theregister.com/2023/01/18/biden_dutch_asml/
[16] https://www.theregister.com/2023/09/19/huaweis_advanced_chip_sparks_us/
[17] https://www.theregister.com/2024/01/05/huawei_5nm_chip_tsmc/
[18] https://whitepapers.theregister.com/
"Never was a vote taken in Brussels or DC to get rid of this industry," he said "But there were votes taken in the Asias — countries like Korea, Taiwan, and China — to get this industry. They put in place long-term industrial policy, tax investment, etcetera, to attract this industry and 30 years later, they attracted the industry."
Gelsinger is of course referring to foundry giants TSMC and Samsung, which produce the majority of leading-edge semiconductors sold today. The Taiwanese and Korean outfits will be Intel's largest competitors as the US manufacturer ramps up its Foundry Services business over the next few years.
[1]
Gelsinger [2]argued that the West's failure was focusing on high-margin aspects of the industry, like the design of chips, and neglecting then offshoring low-margin aspects, such as manufacturing.
[3]
[4]
"We were on the hair's edge of never being able to recover the manufacturing of this industry," he said. "Had I started the rebuilding of Intel a year later, I don't think I could have accomplished it."
This comment is particularly interesting as shortly before the ousting of former CEO Bob Swan and Gelsinger's return to Intel, the chip giant was [5]facing pressure from investors to transition more of its production portfolio to outsourced foundries like TSMC.
[6]
That pressure came after Swan [7]admitted that Intel's 7nm manufacturing process — now called Intel 4 and Intel 3 — was woefully behind schedule.
Gelsinger thinks that outsourcing push may have succeeded, were it not for the COVID-19 pandemic and the supply chain chaos that followed.
"We all woke up and we realized, 'oh my gosh, what happened, 30 years of industrial policy and we lost something so critical to our future'," he said. "The world needs balanced, resilient supply chains, and that's what created the environment for the US and the EU CHIPS Act."
Gelsinger: This biz isn't cheap, you know
Intel hopes to walk away from the negotiating table with a sizable chunk of CHIPS funds in both the US and EU (and [8]some from Israel).
It has already announced six fabrication plant projects, a couple in Arizona plus facilities in Ohio, Magdeburg, Germany, and Kiryat Gat, Israel. Yet, while the US Commerce Department has announced funding allotments to the likes of BAE and Microchip, Intel is waiting for its share of the cash.
[9]
Valued at $53 billion and €43 billion, respectively, US and EU CHIPS Acts are critical to achieving the goal of ensuring local manufacturing, Gelsinger explained, as producing semiconductors isn't cheap or easy.
Looking at the US CHIPS and Science Act, we [10]estimate Intel could walk away with between $2.5 billion to $7.5 billion in funding and tax incentives over time. While those are big numbers, even the larger sum would not completely cover the costs to build a single fab, never mind the six Intel is developing.
[11]Israel to plow $3.2B into $25B Intel fab project
[12]NVMe consortium polishes its specs to support computational storage
[13]Nvidia readies downgraded chips for China, but will anyone want to buy them?
[14]Microchip nabs $162M to keep chips for washing machines – and missiles – flowing
Gelsinger therefore expects a second round of CHIPS funding will emerge.
"I do believe they'll need to be a CHIPS Two, at some point, to continue building those policy decisions," he said.
The extreme cost associated with semiconductor manufacturing is one of the reasons Gelsinger gave for why the US and Europe have fallen behind Taiwan and South Korea.
"If you want to be a cutting-edge semiconductor supplier, you just need to invest $20-$30 billion of capital per year, you need to invest $8 to $10 billion of R&D per year, and you need to do that for 30 years," he said. "There's only three companies in the world that are capable of doing these cutting-edge chips: TSMC, Samsung, and Intel."
China’s lost decade
While Gelsinger remains confident that Intel will be able to compete against TSMC and Samsung, the one country he doesn't appear to be worried about is China.
The Intel chief predicts that China will likely disrupt the market for mature nodes. But, when it comes to leading edge process tech, Gelsinger wagers that China is at least a decade behind the rest of the industry.
The export [15]policies put in place by the US, the Netherlands, and Japan have put a floor for semiconductor production in China at between 10 and 7 nanometers, he opined. "I think this is a ten-year gap, and I think it's sustainable ten-year gap."
Last year we learned that China's state-backed Semiconductor Manufacturing Internal Co. (SMIC) had begun [16]producing 7nm chips for Huawei. Pundits previously believed the most advanced chips SMIC could manage used a 14nm process.
More recently, rumors began to fly that China had managed to produce an even more advanced 5nm part for Huawei's Qingyun L540 notebook. But as it [17]turned out , the machine uses stockpiled TSMC silicon from 2020. ®
Get our [18]Tech Resources
[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[2] https://www.weforum.org/events/world-economic-forum-annual-meeting-2024/sessions/a-conversation-with-pat-gelsinger-and-klaus-schwab/?linkId=100000236116995
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
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[5] https://www.reuters.com/article/us-intel-thirdpoint-exclusive/exclusive-hedge-fund-third-point-urges-intel-to-explore-deal-options-idUSKBN2931PS
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2020/07/24/intel_7nm_chip_slip/
[8] https://www.theregister.com/2023/12/27/intel_israel_fab/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZakE3Vv6RYB9IAK2HkbDqgAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2023/02/28/us_chips_conditions/
[11] https://www.theregister.com/2023/12/27/intel_israel_fab/
[12] https://www.theregister.com/2024/01/17/nvme_specs_get_an_update/
[13] https://www.theregister.com/2024/01/08/nvidia_china_chips/
[14] https://www.theregister.com/2024/01/04/microchip_nabs_162m_to_keep/
[15] https://www.theregister.com/2023/01/18/biden_dutch_asml/
[16] https://www.theregister.com/2023/09/19/huaweis_advanced_chip_sparks_us/
[17] https://www.theregister.com/2024/01/05/huawei_5nm_chip_tsmc/
[18] https://whitepapers.theregister.com/
Re: The West didn't invest
blackcat
Does anyone know how much TSMC and Samsung get from their respective govts?
It is safe to say that when Gelsinger says 'we didn't invest' it doesn't mean 'Intel didn't invest' but actually means 'the US govt didn't give us money'.
Please Consider these words
luis river
Certainly rigth the opinion from Intel CEO, but with some new mind shade: to designer today advance IA chips. The cuasi absolut reign from Nvidia it is real peril to convert on total industry monopoly. In these shouting competitive match only sunnyvale Co. "AMD" their had sucessfully innovation path for convert real competition to Santa Clara Co. "Nvidia". Its time to help CEO AMD, Su Lisa on that matter. !!
So in other words..
The Man Who Fell To Earth
They let the MBA's run the show with short term revenue and gross margins as the only KPI that mattered.
Not exactly a shock now, is it?
Re: So in other words..
Anonymous Coward
Many western governments tend to be even more short term than western businesses and often don't think farther than tomorrow's headline. "Long Term" means the next election.
Re: So in other words..
luis river
Donald Trump its TheRegister follower ??
Doctor Syntax
"the chip giant was facing pressure from investors to transition more of its production portfolio to outsourced foundries like TSMC."
I think that identifies the guilty parties - activist investors
The West didn't invest
And why that ?
Because The West was interested in having their chips made for less, so that their margins would be better.
So yeah, COVID has taught the industry a few lessons : greed is bad and don't put all your eggs in one basket.
Now to see how long it will take to forget that . . .