Intel under pressure to explore strategic options amid chip industry challenges

Posted:
in General Discussion edited December 2020
Hedge fund Third Point is urging Intel to make some big business changes in the face of losing chip supremacy to efforts by Apple, Amazon, Microsoft, and TSMC.

Credit: Intel
Credit: Intel


Third Point CEO and founder Daniel Loeb wrote a letter to Intel chairman Omar Ishrak on Tuesday calling for the company to boost its position as a provider of chips for computers and data centers, Reuters reported. Third Point has a nearly $1 billion stake in the chipmaker.

In his letter, Loeb called Intel's most pressing task its "human capital management issue." He cited the fact that many Intel chip designers have left the company after being "demoralized by the status quo."

"Without immediate change at Intel, we fear that America's access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more," Loeb wrote.

According to Loeb, Intel has lost its pole position in chip making to Samsung and Apple's chip fabricator Taiwan Semiconductor Manufacturing Company (TSMC). He added that Intel is also losing market share to AMD and missing out on the artificial intelligence market dominated by NVIDIA.

The hedge fund CEO also noted that several Intel customers are currently developing their own first-party silicon and sending those designs to contract manufacturers, bypassing Intel.

Apple recently launched its first M1 Mac devices with proprietary Apple Silicon chips. Microsoft and Amazon are also said to be following Apple's lead.

Intel has promised to continue supporting Apple even as it announced its plans to move to first-party processors in its Mac lineup. At the time, Intel also insisted that its chips provided a better experience for consumers.

As possible solutions, Loeb said that Intel should retain an investment advisor to "evaluate strategic alternatives." Those could include separating its chip design from its semiconductor manufacturing business.

Loeb added that Intel could offer new solutions to retain customers like Apple, Microsoft, and Amazon instead of letting them send manufacturing away.

Intel last reported earnings in October. According to CNBC, the company's Q3 fiscal results were better than expected because of continued work-from-home and remote education trends, but showed some weakness in the data center business.
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Comments

  • Reply 1 of 24
    mac_dogmac_dog Posts: 1,066member
    It’s all about the money.
    watto_cobra
  • Reply 2 of 24
    DuhSesameDuhSesame Posts: 1,278member
    Well, they’ve stucked for a decade.  To me, x86 needs a radical change or it will soon lose to ARM in every mobile category.  That said, the compatibility...
    SpamSandwichwatto_cobra
  • Reply 3 of 24
    DAalsethDAalseth Posts: 2,783member
    DuhSesame said:
    Well, they’ve stucked for a decade.  To me, x86 needs a radical change or it will soon lose to ARM in every mobile category.  That said, the compatibility...
    Exactly right. Intel has been coasting on inertia and "backwards compatibility" for a long time. At some point their customers were going to wise up and realize that x86 wasn't the be all and end all, and it was time to move on.
    p-dogwatto_cobra
  • Reply 4 of 24
    For Intel it's servers and gaming, neither one of which is long term sustainable.

    Servers will probably begin a migration to ARM for power efficiency, and game developers go where the customers are.

    I really believe that Apple Silicon will strongly attract the OS agnostic - the price/performance/efficiency will be difficult to resist for the average consumer computer user, unless you're deeply mired in Windows legacy infrastructure.
    p-dogwatto_cobra
  • Reply 5 of 24
    No matter what everyone says, Intel still earn a very chunk of semiconductors money. 
    But again, they are also losing many ground from many front. It is all depends on how many fronts intel want to fight, CPU for desktop and server, AI, super computer (Amazon Cloud kind) or just making chip for someone else. 

    Let’s hope intel will not want to catch all the rabbits once. 
  • Reply 6 of 24
    DuhSesameDuhSesame Posts: 1,278member
    DAalseth said:
    DuhSesame said:
    Well, they’ve stucked for a decade.  To me, x86 needs a radical change or it will soon lose to ARM in every mobile category.  That said, the compatibility...
    Exactly right. Intel has been coasting on inertia and "backwards compatibility" for a long time. At some point their customers were going to wise up and realize that x86 wasn't the be all and end all, and it was time to move on.
    Though I doubt x86 will make serious move in two years.  Even those who were interested in ARM.  Apple could enjoy the massive lead for two years, unless something major happens.
    watto_cobra
  • Reply 7 of 24
    MplsPMplsP Posts: 3,904member
    For Intel it's servers and gaming, neither one of which is long term sustainable.

    Servers will probably begin a migration to ARM for power efficiency, and game developers go where the customers are.

    I really believe that Apple Silicon will strongly attract the OS agnostic - the price/performance/efficiency will be difficult to resist for the average consumer computer user, unless you're deeply mired in Windows legacy infrastructure.
    Totally agree - Intel has been coasting along on sheer momentum with little advancement or innovation. Meanwhile AMD is kicking their butt in x86 architecture, the went down in flames with cellular modems and Apple, Samsung and QC are lapping them with ARM processors. At this point, the main thing they have going for them is the fact that Microsoft hasn't bothered to adapt windows to work on anything else so they still have some reliable business in the PC market.
    watto_cobra
  • Reply 8 of 24
    DAalseth said:
    DuhSesame said:
    Well, they’ve stucked for a decade.  To me, x86 needs a radical change or it will soon lose to ARM in every mobile category.  That said, the compatibility...
    Exactly right. Intel has been coasting on inertia and "backwards compatibility" for a long time. At some point their customers were going to wise up and realize that x86 wasn't the be all and end all, and it was time to move on.
    Yeah. Intel is running on borrowed time. If Qualcomm or NVidia release a decent ARM chip, Microsoft will certainly put their weight behind it because it’s the only way to remain relevant.
    p-dogwatto_cobra
  • Reply 9 of 24
    Last time Intel was doing ANYTHING was under Andy Grove.
    watto_cobraJWSC
  • Reply 10 of 24
    In spite of Intel's recent challenges (many self-inflicted), for a Hedge Fund CEO to call for 'to boost its position as a provider of chips for computers and data centers' seems like an empty statement. Intel already controls 90%+ of these markets and it seems when you have a commanding position you seek to diversify into other segments. GPU's would seem to be the most likely. Apple is to be applauded for the M1, however Apple's Mac sales account for a relatively small slice of the desktop/laptop market and 0.0% of the datacenter compute market. Thanks for the advice though  ;)
    d_2watto_cobra
  • Reply 11 of 24
    Too little too late. Now companies outside of Apple are seeing the benefit of designing AND optimizing their own hw with their sw. For too long it has been just a CPU speed race (and still is to a degree), but those days are passing I think. A long term market win for their average product consumer/user.
    edited December 2020 watto_cobra
  • Reply 12 of 24
    Don't forget that NVIDIA purchased ARM. You can be certain that Intel will have yet another major competitor any day now.
  • Reply 13 of 24
    At the time, Intel also insisted that its chips provided a better experience for consumers.
    What? How can a slow and expensive chip provides better experience for us? We just want CPU that is faster and cheaper and less heat. That’s all about CPU experience. We don’t care if it is Intel, Apple, Microsoft or Motorola.

    I regret buying Intel Gen 10 and got subpar speed that is slower than cheaper AMD. Now M1 MacBook Air is cheaper but faster than the fastest Intel MacBook Pro.

    User Experience are important if you make device with software. Windows vs Mac or Android vs iPhone are affected by experience design. But there is no such thing for chipmaker. Consumer want nothing other than 1) faster, 2) cheaper,  and 3) more efficient CPU. Intel does bad in all of these.
    watto_cobra
  • Reply 14 of 24
    MacProMacPro Posts: 19,697member
    "Daniel Loeb wrote a letter to Intel chairman Omar Ishrak on Tuesday calling for the company to boost its position as a provider of chips for computers and data centers"

    So, this idiot thinks a letter is all it takes?  Hillarious.  
    DAalsethwatto_cobra
  • Reply 15 of 24
    “...[W]rote a letter to Intel chairman Omar Ishrak on Tuesday calling for the company to boost its position as a provider of chips for computers and data centers.”
    I'm sure that hadn't occurred to Intel before.
    watto_cobra
  • Reply 16 of 24
    MacProMacPro Posts: 19,697member
    cincytee said:
    “...[W]rote a letter to Intel chairman Omar Ishrak on Tuesday calling for the company to boost its position as a provider of chips for computers and data centers.”
    I'm sure that hadn't occurred to Intel before.
    Exactly...  lol
    watto_cobra
  • Reply 17 of 24
    While Intel was resting on their assumed laurels, the rest of the industry awakened to new cpu possibilities. The M1 chip was Steve Job's dream when they were designing their first iPhone.

    Apple has spent lots of $$$ and now have probably the fastest cpu in town for laptops. The Apple crew will have in tow years or less their entire product line on their own hardware giving them complete control of their product and on their own schedule. Since Apple is not a majoring terms of total numbers computer builder, there should be no anti-trust issues when all their products have only their processors.

    It is really sad that my fully loaded over $6,000 list 16" Mac Book Pro laptop I bought in December 2019 is out performed by the new MacBook Air except for screen size.

    That to me is real processor progress and innovation that Intel forgot about over ten years ago.
    watto_cobra
  • Reply 18 of 24
    MacPro said:
    "Daniel Loeb wrote a letter to Intel chairman Omar Ishrak on Tuesday calling for the company to boost its position as a provider of chips for computers and data centers"

    So, this idiot thinks a letter is all it takes?  Hillarious.  
    If you own a billion dollars of intel stock, it does.
    avon b7watto_cobra
  • Reply 19 of 24
    MacProMacPro Posts: 19,697member
    MacPro said:
    "Daniel Loeb wrote a letter to Intel chairman Omar Ishrak on Tuesday calling for the company to boost its position as a provider of chips for computers and data centers"

    So, this idiot thinks a letter is all it takes?  Hillarious.  
    If you own a billion dollars of intel stock, it does.
    It does what? Writing a letter to Intel to essentially 'do better'?  I am sure Intel Intel's Chairman acutely aware they are in deep shit.
    watto_cobra
  • Reply 20 of 24
    Intel says their chips provide a better experience for consumers. Counterpoint, no, they do not.
    watto_cobra
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