After years of struggles, Intel seems to have adopted a strict policy towards its gross margins, as the firm would now focus on getting things right financially.
Intel Won't Push Out Products To The Market With Less Gross Margins; Also Indicates An Extensive Partnership with TSMC
Team Blue hasn't been very on track in recent quarters, especially since AI/DC, along with the consumer segment, has seen a massive hit in revenue, part of which has to be attributed to the company's products in the respective segment. The Gaudi AI lineup hasn't received attention at all, while CPUs like the Arrow Lake failed to capture the interest Intel thought it would. However, it seems like under the new leadership, CEO Lip Bu-Tan and other officials are determined to turn the bandwagon towards higher gross margins, and the company is now adopting a "vigorous" strategy to maintain its profitability.
At the BoA global technology conference, Intel's Products CEO Michelle Johnston revealed that Intel's product portfolio is now more focused on driving gross margins and would eliminate R&D on any product that doesn't bring in more than 50% margins. So, this indicates that we'll see a lot more plans being cancelled by Intel, and the main reason would likely be their economic feasibility.
[....] but we have it now so that product doesn’t move forward, you actually don’t get engineers assigned to it if it’s not 50% or higher gross margins moving forward.
- Intel's Products CEO
This indicates that Intel's next-gen CPUs, likely Panther Lake and Nova Lake, will feature better gross margins than previous generations, hence they could potentially turn over the revenue generated from the consumer segment. Intel's Products CEO also reiterated the company's commitment to adopt a dual-sourcing strategy for its foundry needs, claiming that Nova Lake will use both IFS and TSMC, as the priority here is to get the best product out on the market. The "IDM 2.0" strategy imposed by former CEO Gelsinger does look to be obsolete under the new leadership.
And so how do I use both Intel Foundry, we use Samsung as well, and TSMC in ways that really allow me to optimize. And so, I’ve been very public that come our next generation of product NovaLake, I’m using both TSMC and Intel Foundry.
Intel has a long way to go in recovering from its financial setbacks over the years. The company now needs to put special focus on the AI/DC segment, which has been the front-runner when it comes to revenue figures for competitors. Under the new CEO, Tan, Team Blue does look to be on the right path, but any meaningful impact will take months, if not years.
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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