Intel: Trouble in the IDM 2.0 paradise?

Article By : Majeed Ahmad

Intel CEO Pat Gelsinger has a big job ahead of him, and his vision of IDM 2.0 alone won't cut to the chase.

Just when the U.S. Congress passed the $52 billion CHIPS Act with bipartisan support, the news Intel was craving for months, its CEO Pat Gelsinger was standing on the wreckage of disastrous second-quarter results in which the chipmaker missed revenue targets in the crucial data-center business. And its foundry revenue stood at a meager $122 million.

Worst, at around the same time, its former alter ego AMD surpassed Intel in market cap, reaching $153 billion compared to Intel at $149 billion. Another shocker: Intel’s foundry rival TSMC announced a quarterly revenue of $18 billion, surpassing Intel’s second-quarter revenue of $15 billion.

Source: Intel

It’s easy to blame predecessors, but wasn’t Gelsinger tasked to take Intel out of trouble when he was given the reins of this iconic semiconductor outfit in early 2021? What happened? Pat Moorhead, principal analyst at Moor Insights and Strategy, points to the delay in Sapphire Rapids, the code name for Intel’s upcoming server and data center chip. There had been production problems regarding Sapphire Rapids, and Intel had to restart the manufacturing process, pushing its volume production to the end of this year or even to 2023.

Another perception among industry observers is that Gelsinger’s transformative plan to turn Intel into a contract manufacturer for semiconductor devices is taking its toll. Even on that foundry frontier, which the company calls IDM 2.0, it’s worrisome that Intel plans to cut capital-expenditure plans for next year by $4 billion. That, for a start, shows that Intel and its chief Gelsinger are now under immense pressure.

It’s worth mentioning that last year, Gelsinger claimed that Intel’s margins would remain comfortably above 50%. What’s apparent now is that Gelsinger has a big job ahead of him, and his vision of IDM 2.0 alone won’t cut to the chase. His honeymoon at Intel’s top job is over, and he seems to have some treacherous waters ahead of him.

 

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