In 2000, Intel stood at the top of the technology wave with a market value of US$300 billion.

More than 20 years later, among Intel's peers, the market value of TSMC, which was originally US$50 billion, exceeded US$750 billion, the market value of NVIDIA, which was US$5 billion at the time, exceeded US$2 trillion, and AMD, which could not even touch its heel, has a market value of more than US$330 billion. …

Intel, which had a market capitalization of more than US$300 billion at the time, now has a market capitalization of less than US$190 billion.

01 The worst overlord

On March 5, Intel made a high-profile announcement that it had received the world’s first new generation high NA EUV lithography machine from ASML.

As a necessary "weapon" for the mass production of advanced process chips below 2nm, its price exceeds US$300 million. Intel, which has spent huge sums of money, has revealed to the world its ambition to catch up with TSMC, the global "King of OEMs".

However, as the "last" player that has ranked tenth in the world's wafer fabs, it is an "impossible mission" for Intel to make a comeback.

In 1971, Intel, which was just three years old, developed the first commercial processor Intel 4004, kicking off the world's computer and Internet revolution.

Since then, from memory to personal computers and server CPUs, from chip design and manufacturing, Intel has long been the absolute hegemon of semiconductors in the United States and even the world.

At the end of the last century, the "Wintel" alliance formed between it and Microsoft Systems created the wave of the global PC era. In 2000, Intel's market value exceeded US$300 billion, and its reputation was greater than that of Nvidia today.

But after its peak, it was beaten almost all the way and fell into an unstoppable decline in the past decade.

In 2017, an explosive news that "Samsung's performance surpassed Intel's and became the new overlord of semiconductors" swept the industry.

As the king of memory chips that focus on low profit margins and large price fluctuations, Samsung has been overpowered by Intel, which has a high share and high profits in key markets such as personal computers and servers.

Faced with the sudden outcry, Samsung cautiously declined to comment. Instead, Intel said strongly, "We are very satisfied with our strategy and performance."

The fact is that that was Intel's last stubbornness: the original 10nm chip plan was postponed, which is extremely fatal in the semiconductor industry where technology is king. Its two biggest rivals in the CPU and foundry markets, AMD and TSMC, have each made breakthroughs.

Due to technological difficulties and the rise of competitors, Intel has become particularly passive.

From 2018 to 2019, Intel's revenue and profits hit new highs repeatedly, but because it lagged far behind its competitors' growth rate and its market share continued to be eroded, it was gradually overtaken by its opponents.

In July 2020, Intel, which was already far behind its opponents, fell further into the abyss.

The disaster came from then-CEO Bob Swan's helpless statement on a conference call: The company's future chip manufacturing plant (wafer fab) may never be able to catch up, and it may even have to consider using contractors to manufacture 7nm chips. .

Although he tried to stay calm, every analyst present felt that he was "stuttering" in his speech. After all, this may be the most radical "bad news" in Intel's 52-year history - publicly admitting that it is manufactured from high-end chips. Peak drop.

Some American media even exclaimed that Intel's "astonishing failure" heralded the end of the American chip era. Overnight, Intel's market value evaporated by nearly 300 billion yuan.

In February 2021, desperate Intel fired CEO Swan, who had just been in office for two years. The person who took over the task at the critical moment was Pat Gelsinger, Intel's eighth CEO.

In 1985, Andy Grove (Andrew S. Grove), one of the founders of Intel, approached Kissinger, who wanted to study for a Ph.D., "You can fly a simulator here, or stay at Intel and fly a real aircraft."

More than 30 years later, Kissinger became the "captain" of Intel, but his mission was to save this overlord that had rewritten and led history from being completely abandoned by the times.

He announced ambitiously: Intel is back!

As a veteran who has worked at Intel for nearly 30 years, Gelsinger knows that "mistakes of more than ten years cannot be solved overnight."

But he still tried his best to make amends and announced the IDM2.0 strategy of running the design and manufacturing departments separately, that is, using a more flexible wafer foundry model, more radical spending on expansion and technological innovation, to seize the lost market share, and even re-enter the market. Return to the king.

To this end, Intel took the initiative to divest its secondary businesses and focus on design and manufacturing. In March 2021, it invested US$20 billion to build two new wafer factories in Arizona, USA; a year later, it invested more than US$20 billion to build two new factories in Ohio.

In July 2021, Intel announced the "Five Process Nodes in Four Years" plan, which means to promote five process nodes of Intel 7, Intel 4, Intel 3, Intel 20A and Intel 18A (1.8nm) in the next four years, and restart in 2025. Gain process leadership.

During a conference call on Wall Street, Kissinger said bluntly: "Great companies are able to recover from difficult and challenging times and emerge stronger, better, and more capable than ever before."

A group of industry analysts poured cold water on it: "The new roadmap is very radical, but I don't know how it will be realized." Intel's continuous miserable performance is a strong basis for their pessimism.

A group of industry analysts poured cold water on it: "The new roadmap is very radical, but I don't know how it will be realized." Intel's continuous miserable performance is a strong basis for their pessimism.

In July 2022, Intel's Q2 financial report reported total revenue of US$15.321 billion, a drop of 22%, and its first net loss of US$454 million in 10 years, which can be called the "worst performance in history."

In the first quarter of 2023, Intel suffered a net profit loss of US$2.76 billion, its largest loss in history.

On January 26, 2024, Intel released a financial report showing that revenue in 2023 was US$54.2 billion, a year-on-year decrease of 14%; net profit was US$1.7 billion, a year-on-year decrease of 79%, and the stock price plummeted by another 10%.

Now, even Kissinger, who is extremely eager to make a comeback, is forced to face reality: "There is still a long way to go before we can regain our former strength."

After all, Intel, which had a market value of US$300 billion in 2000, now has a market value of less than US$200 billion. At that time, TSMC and NVIDIA, whose market values were only about US$50 billion and US$5 billion, are now as high as US$759.1 billion and US$2.19 trillion respectively.

Even AMD, which couldn't even touch Intel's heel at the beginning, now has a market value of more than 330 billion US dollars and has stepped on Intel's feet.

02 Retreating steadily

In the 1960s, Gordon Moore, co-founder of Intel, proposed the famous Moore's Law: When the price remains constant, the number of transistors that can be accommodated on an integrated circuit will double every 18 to 24 months, and the performance It will also be doubled.

Since then, Intel has become the most loyal defender of the law: it firmly believes that as long as it follows this "magic curse" perfectly, it will be invincible.

Even during the industry recession, Intel has always invested more than 10% in R&D to catch up with Moore's Law. As a result, it achieved continuous transcendence in products and markets, and in 1992 it became the world's largest semiconductor company.

From 2005 to 2007, Intel launched a unique Tick-Tock production model, which uses two years as a rotation unit. The "tick year" focuses on chip manufacturing, updating chip manufacturing processes and improving technology; the "tock year" focuses on chip design and innovation. architecture.

Under this framework, as long as chip performance and manufacturing processes are steadily improved, Intel will not waste the performance of the previous generation of processors due to an excessively fast R&D pace; the large investment in wafer fabs can also be effectively amortized by the huge demand for production capacity.

In turn, Intel can gain more market and financial advantages over its competitors at lower costs, further promoting the continued growth of higher-performance chip research and development and production capacity expansion.

As a result, Intel won a golden decade without wasting any opportunities and costs, and from 45nm and 32nm to 22nm and 14nm research and development, it was a smooth process and far ahead. Rivals such as Samsung, TSMC, and AMD can only follow suit.

This huge success has made Intel one of the few giants qualified to adhere to the IDM model: that is, to handle the core aspects of semiconductor production such as design, manufacturing, packaging and testing, and sales.

At first, global semiconductor giants such as Intel, IBM, and Fujitsu adopted the IDM model of "design and build by themselves."

However, the R&D and production costs of advanced process technology are too high, and major manufacturers, which are increasingly losing their market, have gradually stopped investing in wafer fabs. The number of IDM global players dropped sharply from 30 at 130nm to less than 5.

However, the IDM model has obvious advantages. All aspects of the chip can be reasonably configured, and smooth internal communication can reduce transaction costs, significantly shorten product launch time, and thus obtain higher profit margins.

As a result, Intel was able to rely on this model to dominate the world and dominate the pack with huge profits of over 60% gross profit margin.

However, in the era of Intel's winner-take-all, a force that can subvert it is secretly growing.

In 1987, Andy Grove, who had a close personal relationship with Zhang Zhongmou, just took office as CEO of Intel and changed the fate of TSMC, which was founded in the same year, with one sentence: Maybe Intel can use you.

Since then, TSMC, which has taken over some of Intel's low-end chip production capacity, has tasted the benefits of foundry. But Zhang Zhongmou, who was not satisfied with the "leftovers" of major IDM companies, made a decision that would have a profound impact on the world's semiconductor industry chain: to become a professional wafer foundry.

At first, TSMC wanted to embrace Intel again, but was rejected for financing. Even Moore personally advised Zhang Zhongmou: "You have had many good ideas, but this one is not good."

But this time, both Moore and Intel were wrong.

After 1991, with the arrival of the semiconductor boom cycle and the rise of the computer industry, the low-threshold chip design industry saw an influx of new blood. TSMC has become the biggest source of confidence for these start-up companies that do not have the funds and manpower to build wafer factories.

By 1994, TSMC, which was successfully listed, had 137 customers and a market value of NT$120 billion.

This can be called a watershed in the history of semiconductors. Intel's IDM model is constantly defeated by TSMC's professional wafer foundry model. Many opponents that were ruthlessly strangled by Intel under the original model were able to take a breather or even rise secretly.

In 1995, Huang Renxun, who had been starting his business for two years, had no funds to build a wafer fab, so he could only write to TSMC for help. Soon, Zhang Zhongmou called back and agreed to OEM, which changed Nvidia's destiny just as Intel changed itself.

With the help of TSMC's professional and reliable foundry model, the fledgling NVIDIA was able to quickly occupy market segments. After Nvidia proposed the GPU concept, Huang Renxun even emphasized: There is no Plan B, everything is on TSMC.

Sure enough, with the help of TSMC, Nvidia instantly became the world's leader in graphics chips. Huang Renxun later said happily: "If I had built my own wafer factory, I might have only become a CEO with a revenue of tens of millions of dollars."

Similar stories also happened to Qualcomm and AMD.

In 1996, mobile phones began to spread around the world. Qualcomm, which had suffered from huge investment in research and development of wireless communication technology, naturally found TSMC as an OEM. This greatly eased the financial pressure and allowed it to focus entirely on CDMA technology and rise to become an industry giant.

AMD founder Jerry Sanders initially stubbornly believed that "a real man owns a fab." Even though Zhang Zhongmou said, "My production cost is half that of Intel, and the quality is twice as good," he still failed to convince him to do OEM work.

But in this old model, AMD, which is lagging behind in all aspects, is no match for Intel at all. After the launch of Intel's Tick-Tock model, AMD, which lagged behind both in product design and in advanced manufacturing processes, was unable to resist and was once squeezed to the brink of bankruptcy.

In desperation, AMD spun off its wafer fab in 2009, abandoned the IDM model, and focused on design. In 2014, AMD welcomed Su Zifeng, a Chinese-American female CEO. She further gambled on design, focused on self-research of the new Zen architecture, and relied on TSMC's continuous breakthrough process technology to catch up with Intel at full speed.

As a result, Intel has completely ushered in a moment of dual-front combat with the world's top chip design companies and top manufacturing companies, and is being pushed into the abyss by its opponents step by step.

In terms of manufacturing, Intel announced in 2014 that the mass production of the 14nm process was postponed again, and the outside world had a premonition that the Tick-Tock strategy was beginning to fail; TSMC launched the "Nighthawk Project", gathering nearly 400 researchers, working in three shifts 24 hours a day, to attack 10nm.

In 2017, Intel's 10nm breakthrough plan was "difficult to produce". The 14nm+ process that it reluctantly released was ridiculed as "squeezing out toothpaste". The Tick-Tock model that had been running for ten years declared "bankruptcy". TSMC took the lead in achieving 7nm volume in 2018. Produce.

In terms of design, AMD has blown up the industry with its Ryzen series CPUs that have faster processing speeds and are less than half the price of Intel.

In 2018, after TSMC's 7nm mass production, AMD was more determined to transfer all production capacity to it, and Intel further fell into the vicious cycle of the IDM model: when its own factories cannot implement more advanced processes, it will hinder design innovation, and backward design will make the market And the efficiency is lagging behind, which drags down the company's investment and makes it impossible to realize advanced processes.

In July 2020, Intel once again announced the postponement of the 7nm process. The 5nm chips produced by TSMC have been launched together with the iPhone 12 and Huawei Mate 40, and the 3nm chips are also on the agenda.

At this point, TSMC's manufacturing has become a nightmare that Intel can "never catch up with". AMD, which has taken off on the shoulders of TSMC, has also continued to make a glorious counterattack, surpassing Intel in market value for the first time in February 2022, and now accounts for more than 20% of the global PC market. and server market share, eroding Intel’s future at high speeds.

In this sense, Intel's failure is a failure of its model, a failure of its attempt to single-handedly compete with global rivals in the two fields of design and manufacturing, and a failure of trying to do everything but ultimately accomplishing nothing.

But in addition to the model, Intel also has a bigger reason for failure.

03 Lose future

At the 2006 Mac World Conference, a classic scene in the history of technology occurred:

Intel CEO Paul Otellini, wearing a semiconductor purification suit, handed a large silicon wafer to Steve Jobs and said excitedly that "Intel is ready."

In the past decade, Intel has dominated most of the world's personal computer CPU market, while Apple is the last unconquered "virgin territory." Otellini, who was recognized by "Silicon Valley Idol" Steve Jobs, won a huge victory for Intel.

Since then, the two sides have become close allies, but Otellini won at the beginning but lost at the end.

When the first-generation iPhone product was just beginning to be brewed, Jobs personally approached Otellini and hoped that Intel would manufacture chips for Apple smartphones. However, this time Otellini made a historic mistake that will go down in history.

He carefully organized internal experts to analyze and discuss the possibility of manufacturing chips for the iPhone. The experts agreed that the price of the order given by Jobs was too low and the quantity was limited, making it an uneconomical deal.

Otellini listened to these professionals and said no to Jobs.

The experts are right too. At that time, Intel already occupied an absolute share of the X86 chip market for personal computers and servers, and profits were rolling in like a "money printing machine" running at full speed.

However, in the nascent mobile chip field, which is dominated by devices such as smartphones and tablets, ARM architecture products with lower performance and power consumption can suffice. It is difficult for Intel to create high added value. If it invests heavily, the gains may outweigh the losses.

Intel even took the initiative to sell its XScale business, which produces ARM architecture products, and developed a low-power x86 chip called Atom to snipe ARM products into the laptop market and further defend its advantages in the computer field.

To put it simply, Intel chose to concentrate its efforts on the computer market and lacked interest in the mobile market.

An opportunity to win the next wave of industrial competition was ruined by Intel himself.

In the end, Apple's first-generation iPhone sales were more than 100 times higher than originally expected. Apple's revenue from smartphones quickly surpassed Intel's in a few years. Betting on the wrong future not only caused Intel to lose the biggest ticket in the mobile Internet era, but also made it die in the ice cave where personal computers continued to decline. Otellini also regretted rejecting Jobs at the beginning, saying that for:

"The most regretful thing in my career."

But this may not be Intel's most painful lesson.

In 2006, NVIDIA, relying on the trend of GPU, has begun to show its leadership in changing the future.

At that time, AMD aggressively acquired ATi, the second largest GPU on the market, and Nvidia immediately launched the Tesla GPU with CUDA architecture, whose performance was comparable to the "nuclear weapons" in the computing field.

Nvidia's dominance has made Intel wary. In order to stifle Nvidia's progress, Intel not only interrupted the integrated graphics cooperation between the two parties and launched a general-purpose central processing unit (GPCPU), but also announced a major decision: launching the Larrabee project.

This project is said to have invested billions of dollars and is a rare charge for Intel to reach the peak of GPU technology. Its leader is Pat Gelsinger, Intel's first CTO and current CEO, who led flagship products such as the 80486 processor.

But the impatient Intel, when its product development encountered setbacks and could not be launched as scheduled, also couldn't stand the "uneconomical" investment that seemed like a black hole, and even if it succeeded, there was no big prospect, so it resolutely "cut it off". project.

Even Kissinger, who persisted in insisting on the project, was kicked out of the company.

After cutting off the Larrabee project, Intel also had a chance to fight back: it decided to follow AMD and buy Nvidia.

But Intel missed this opportunity to change its destiny again.

At that time, Nvidia's market capitalization was only around 10 billion U.S. dollars. For Intel, price was not an issue for the acquisition of Nvidia. However, it is said that the company's management was arguing over "what position should be given to Jen-Hsun Huang" and could not reach a consensus, so the acquisition ultimately failed.

Today, Gelsinger, who has returned to the helm of Intel, is still brooding about the past from time to time. "When I was kicked out of Intel, they killed this project that would change the artificial intelligence landscape."

Faced with NVIDIA, whose market value exceeds two trillion US dollars, Kissinger is still unconvinced, and even believes that "NVIDIA's success in the artificial intelligence industry is purely accidental", while Huang Renxun is "extremely lucky."

But Bryan Catanzaro, an Nvidia executive who has worked on the Larrabee project, disagrees with Kissinger. In his view: "Nvidia's dominance does not come from luck. It comes from vision and execution, which is what Intel lacks."

References

[1] "Intel Apocalypse: Lost to TSMC, also lost to myself, and even more to the times" Brocade

[2] "Chip War" Huake Press

[3] "Chip Wave" Electronic Industry Press

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