Intel, which has been in the foundry for 10 years, will Samsung and TSMC catch up this time?

[위클리반도체] Intel, the world’s first integrated semiconductor (IDM) company, announced that it will invest 20 billion dollars (about 22.700 trillion won) in Arizona to build two factories and strengthen the semiconductor foundry (consignment production) business. It created Intel Foundry Services (IFS) as a foundry subsidiary and appointed Dr. Randyer Kapur, the current senior vice president of Intel, as the CEO. The new CEO of Kapur is a manufacturing process expert who joined Intel in 2017 after working for Applied Materials, a semiconductor equipment company.

Last year, Intel’s sales of $78.67 billion and operating profit of $2.37 billion were $2.67 billion, making it the world’s largest semiconductor company, dominating Samsung Electronics and TSMC. The semiconductor industry is very tense whether Intel will be able to beat Samsung Electronics and TSMC in the foundry business.

It was in 2012 when Intel officially started the foundry business. In that year, Intel created the’Intel Custom Foundry Group’ that orders production by a semiconductor design company (fabless) with a 22-nanometer (nm·1nm is 1 billionth of a meter) process. But Intel’s foundry business didn’t expand that much. Intel, which has dominated the CPU for PCs for a long period of time, and even surpassed mobile semiconductors, had a great conflict with Apple as well as other fablesses. The fablesses did not want to order semiconductor production from Intel, even giving them permission to look into their design assets (IP).

Intel almost won a foundry contract for Apple Silicon, a mobile application processor (AP) for Apple’s iPhone in the mid-2000s. However, Intel declined Apple’s offer and the contract went back to Samsung Electronics. The iPhone revolutionized the smartphone, and Samsung Electronics became a newcomer in the foundry industry based on Apple’s contract. At the time, Intel’s CEO Paul Otellini regretted, “The sales of the first iPhone were more than 100 times the maximum we expected. We should have accepted Apple’s offer.”

Intel is estimated to have generated more than $1 billion in sales in the foundry business at one time in the mid-2010s. However, the foundry business was not active. The contracts with Apple, Qualcomm, Nvidia, and AMD, which are considered large fabless, have not been reached. Altera, bought by Panasonic and Intel in Japan, was a major customer in the Intel foundry business. The Intel Custom Foundry Group eventually disappeared in 2018.

But as of 2021, Intel has decided to bring the foundry business back to life. This is through the presentation of Pat Gelsinger’s CEO on the 23rd (local time). Gelsinger’s CEO announced the vision of’IDM 2.0′ that it will be reborn as a new IDM by re-entering the foundry business. Initially, the semiconductor industry expected that Intel will leave the foundry of its products to Samsung Electronics or TSMC on this day, but the announcement was the exact opposite. Rather, it was a declaration of war against Samsung Electronics and TSMC. Gelsinger’s CEO said on the day that “the foundry market will grow to $100 billion by 2025.” did.

Intel has maintained a firm market dominance in the PC CPU and memory market, but this position has been shaken since the mid-2010s. Intel did not fall short of Qualcomm and ARM in the mobile semiconductor market, and is now losing to AMD in the PC chip market. Mobile semiconductors that have become popular with the advent of smartphones are mobile APs and communication modem chips. Their performance is also important, but catching’fever’ is the key. It should be low power and high efficiency. Intel’s mobile semiconductors excelled in performance, but did not meet the requirements of low power.

In the midst of this, large existing customers such as Apple, Microsoft (MS) and Amazon started to design semiconductors themselves. This means that customers who have been using Intel-designed products can leave Ururu. Last year, Apple adopted a self-designed M1 instead of the existing Intel CPU as the CPU to be mounted on its laptop, the MacBook. The M1 is a system-on-chip (SoC) based on British ARM’s basic design, and was produced by TSMC’s advanced 5-nano foundry line. Apple installed the M1 for the first time in the 4th generation MacBook Air and 5th generation MacBook Pro, which were released last year, and plans to expand the product line in the future.

Now, for Intel, a new growth engine called the foundry is in dire need. “Intel is the only company with software, semiconductors, packaging and manufacturing processes that customers can trust,” said Gelsinger’s CEO. “We will be able to meet the exploding demand while continually and safely supplying semiconductors for the world.” did. That is the will to appeal Intel’s foundry capabilities to large customers.

In the foundry business, abundant semiconductor IP and enormous facility investment are essential conditions for success. Intel, the closing price of semiconductors, has accumulated vast IPs for decades, from CPUs to communication and server semiconductors, Internet of Things (IoT), and memory. In addition, it is building close networks with large fabless companies such as Qualcomm, AMD, and Nvidia in Silicon Valley.

Intel also has another reinforcement group. Joe Biden’s US administration declared the prominence of US semiconductors, emphasizing domestic production of semiconductors. The Biden administration is expected to actively support the construction of a semiconductor plant in the country, as well as induce fablesses in their country to put their work on Intel. Not only four major customers in the foundry industry, such as Apple, Qualcomm, Nvidia, and AMD, but also leading local information technology (IT) companies such as Microsoft, Amazon, and IBM can entrust the foundry to Intel. Microsoft and IBM have already announced plans for cooperation with Intel’s foundry declaration. “The collaboration with IBM aims to accelerate semiconductor manufacturing innovation across the ecosystem, increase the competitiveness of the US semiconductor industry, and support key initiatives of the US government,” said Intel.

In terms of process technology, Intel is an opponent that Samsung Electronics cannot ignore. Since the commercialization of the current 14-nano process technology, Intel is not able to speed up the next-generation process, lagging behind Samsung Electronics and TSMC. Samsung Electronics and TSMC are the only companies in the world to successfully commercialize advanced processes below 5 nanometers. However, Intel’s 14-nano process alone is evaluated to be equivalent to the 10-nano-class process of Samsung Electronics and TSMC.

If Intel secures competitiveness in the 7-nano process as planned and reaches the level of ultra-fine processes below 5 nm, it could pose a great threat to existing foundry companies. Gelsinger said, “We are preparing for the 7-nano process well,” and emphasized, “We are also working with ASML to increase the utilization of extreme ultraviolet (EUV) technology.”

Currently, the foundry market is made up of Samsung Electronics and TSMC’s’second strong’ and the rest of the companies that cannot close the technology gap. In terms of sales, TSMC recorded 44.2 billion dollars last year, accounting for half of the total market (84.6 billion dollars). Samsung Electronics occupies about 17% with 14 billion dollars.

Some believe that Intel’s foundry business will not be easy to catch up with the technology gap in the short term. First of all, Intel’s 7-nano semiconductor process is expected to be mass-produced only by 2023. Heo Yeom, chairman of the Korea System Semiconductor Forum, said, “The foundry business is a service business that has to deal with customers, and it is an urgent priority for Intel to secure experience and mind about it. “It won’t be easy to change culture overnight.” Ahn Ki-hyun, head of the Korea Semiconductor Industry Association, also said, “I am wondering how much Intel, which has not adapted to the mobile era, can utilize its strengths as IDM in the foundry business.” “It will not be easy to close the technology gap with existing foundry companies.”

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