Intel Chief Doesn’t Think China Can Lead In Chipmaking, Talks About Trillion Transistor Chip

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Intel Corporation's chief executive Mr. Patrick Gelsinger believes that it is unlikely China's Semiconductor Manufacturing International Corporation (SMIC) will catch up with its global peers in the race to manufacture semiconductors with leading edge fabrication processes. Mr. Gelsinger made these remarks, in addition to those surrounding the company's competition with chip designer Advanced Micro Devices, Inc (AMD) and Intel's ability to manufacture a trillion transistor chip at the Credit Suisse technology conference earlier this month. During his talk, he also stressed on the importance of supporting U.S. chip companies due to Asian political instability.

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His talk at the event touched upon several topics including Intel's recent datacenter market performance, its upgraded technology roadmap, future compound annual growth rate (CAGR) estimates and the current outlook in the semiconductor industry.

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Mr. Gelsinger outlined that repeated incursions in Taiwanese airspace by China's fighter jets presented a geopolitical risk to the semiconductor industry. The world's largest contract chip manufacturer, the Taiwan Semiconductor Manufacturing Company (TSMC) is headquartered in the island and uses it to manufacture its latest chips and research and develop new technologies.

He would go on to repeat these comments at the Fortune Brainstorm Technology Conference later in the week. During the Credit Suisse event, the Intel chief stated that:

As I was flying down here yesterday, the Wall Street Journal reported that there were 27 Chinese planes in Taiwan airspace yesterday.

How do you feel about having your sole source foundry capability in Taiwan right now? I mean, this is a geopolitical risk. And as we've argued since the beginning of my 10-year, the world needs a more resilient, geopolitically balanced supply chain. So we're seeing a lot of enthusiasm to support us moving into that market.

The executive also stressed that if Intel maintained its current innovation rate, it could easily make the world's first trillion transistor chip by the end of this decade. He believes that:

And with that today, and I happen to just bring along, fancy that I actually have a show and tell this is the $100 billion transistor Ponte Vecchio, right. And what we said is we're going to maintain, if not go super Moore's Law, such that we will have our first trillion transistor chip, by the end of the decade. Just think about it, trillion frickin transistors on one package. But we're going to do so by leveraging two and a half and 3D packaging technology.

Mr. Gelsinger at the Intel Accelerated Event.

Prior to this, he also indirectly hinted that it is impossible for China's Semiconductor Manufacturing Corporation (SMIC) to catch up with its technologically advanced peers in the chipmaking world. SMIC, which is struggling to produce chips on a 7-nanometer (nm) process node, is China's best chipmakers.

According to Mr. Gelsinger:

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Now the foundry business as well, there's only three companies in the world that can do leading edge process technology, and there's not going to be a fourth. The capital requirements and the R&D requirements are so extreme, it's not like somebody else is going to come running by and say, John, I got a great business idea. All I need to do is have a $5 billion R&D stream, and on the order of an invested $25 billion of capital, and I'll start doing foundry services five years from now. It's so extreme at this point.

We're now in the cycle of basic business 101, that it's a consolidation cycle, not an expansion cycle in the number of players in the foundry business.

Finally, in best for last, the Intel executive also commented on his company losing market share to AMD. In response to a question about capital allocation expenditure over the next five years, the CEO replied:

Yeah, if you think about the $25 billion to $28 billion, that's a net number. We hope to do more than that based on capital offsets from government investments, as well as customer prepays and other investment criteria for that. But the vast majority of the $25 billion and $28 billion is just to feed the core business. We have, in some regards, I haven't lost share to AMD, I've given share to AMD, because they didn't have capacity, right. So a lot of this is just catch up to our growing market and years of under investment. So the bulk of the $25 billion to $28 billion is just driven by the core business and catching up to the demand curve in the core business.

He also expressed optimism on Intel's ability to take away lost data center market share to AMD. While the latter continues to deliver strong growth in the area, Intel's performance has been rather muted.

For data center, Mr. Gelsinger explained that:

Ice Lake wasn't our greatest product, but it closed some of the gaps. Sapphire Rapids closes all the gaps. So we're now ahead with Sapphire Rapids coming in Q1 of next year. And on some of the benchmarks it's close to AMD, on other benchmarks, it's unquestionably the best product. And like the AI performance of Sapphire Rapids is now 50% of the highest end Nvidia specialty processor, right. It is dramatic, it's hundreds of percent better than AMD’s alternative at this point. So we're clearly having some very strong points of advantage with it.

But, AMD, we expect them to respond next year. So it's going to be a little bit nip and tuck over the next couple of years. And, as you suggest, it's going to be out a couple of years until we're back to unquestioned leadership in the data center. It takes a bit longer in the data center side, the development cycles are longer. And as our process technologies get better and better, our server roadmap takes a little bit longer to take advantage of that.

 

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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