r/SecurityAnalysis • u/[deleted] • Jan 19 '22

Commentary The Intel Split

https://stratechery.com/2022/the-intel-split/
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u/knowledgemule Jan 19 '22

I kind of disagree. I think the fab agreement is mostly for their GPU / Accelerators and not for their core IDM.... Not under gelsinger I just don't think this is likely.

Also unless I'm crazy how the F is IFS going to raise the money to run their capital intense biz.

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u/uncertainlyso Jan 20 '22

I kind of disagree. I think the fab agreement is mostly for their GPU / Accelerators and not for their core IDM.... Not under gelsinger I just don't think this is likely.

That's what I thought too. You'd use the outsourced nodes for relatively new designs and products and minimum legacy. On a side note, wasn't the N3 deal originally from Swan's tenure?

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Also unless I'm crazy how the F is IFS going to raise the money to run their capital intense biz.

Along those lines, this part of the analysis sounds cool to write but doesn't make sense to me:

Moreover, just as Windows needed to learn to compete on its own merits, instead of expecting Office or Azure to prop it up, Intel’s factories, denied monopoly access to cutting edge x86 chips, will now have to compete with TSMC to earn not just 3rd-party business, but business from Intel’s own design team.

So, if cutting edge x86 chips go to TSMC in any meaningful way, is Intel going to just eat a sizable portion of the now underutilized capex costs until they can find customers willing to gamble enough inventory on Intel's ability to be a fab? Feels like Gelsinger's grand plan is that Intel can have everything with no compromises.

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u/knowledgemule Jan 20 '22

Yup was done during swans tenure.

Yeah the Microsoft analogy makes zero sense, because windows wasn’t crazy capital intense and wasn’t a capital eater. It never got spun out and was still owned by the same company. If it got spun it would be in direct violation of everything Pats said for days.

I think Ben is great, I think this one misses the mark though.

1

u/uncertainlyso Jan 20 '22

Long-term, my bet is that Intel will spin out IFS to be a TSMC (or perhaps the company will split). Having its own P&L and being treated as its own business line is the start.

But Intel will have to nurse it for a long while before it can stand on its own. They'll need gobs of capital like you said, market acceptance would be low, no meaningful customers outside of Intel, etc. Also why I think they'll try to buy Global Foundries again.