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  • ideal_invst ideal_invst May 11, 2012 11:12 AM Flag

    Intel's fab flexing may pay off big amid capacity shortages

    Key Points:
    My comments are marked ***

    (1) That reality means that TSMC is the likely Apple partner going forward. TSMC will then have to build enough capacity to accommodate Qualcomm, Nvidia and Apple. Guess who wins in that pecking order?

    Cleary said in a research note:

    We believe that only Intel, TSMC and Samsung have a viable shot at being selected as Apple’s next foundry partners. UMC clearly lacks the scale and leading-edge process level in order to compete in this league, while GlobalFoundries probably still has to prove itself following the public divorce from AMD. TSMC is pulling out all the stops in order to win Apple’s business, including hiring teams of IC design and system level engineers, accelerating its 20nm process development….

    It seems most likely that TSMC will have the inside track to become Apple’s next foundry partner—once TSMC gets 20nm up and running. The broader question will be whether Apple will prove lucrative enough as a customer to justify all of these efforts.

    Add it up and you may have the bulk of the mobile industry moving through one manufacturing partner—TSMC—in 2014.

    *** Exactly, what is the pecking order....Nvidia was recently upgraded with more capacity by TSMC. Are Qualcomm and AMD now second-class citizens? Yes. If Apple becomes THE high-priority customer, what happens to Nvidia, Qualcomm, and AMD?

    *** Is TSMC going to invest all the money to win Apple as a customer? Apple, being Apple, will negotiate hard on pricing. Who is going to risk capital investment? What happens when there is a downturn or decreased volume from Apple?

    (2) Intel’s advantage here—even though it is a bit player in mobile today—is that it controls its own manufacturing and therefore its destiny. Architecture squabbles with ARM aside, Intel could gain traction in mobile simply because it can deliver the manufacturing goods.

    The chip giant did a lot of talking about its manufacturing cadence during its analyst meeting this week. Evercore Partners analyst Patrick Wang said that Intel was “fab flexing.”

    *** Architecture squabbles with ARM aside, Intel could gain traction in mobile simply because it can deliver the manufacturing goods -- that about sums it up.

    *** From my recollection of yesterday's conference call: Otellini quoting Moore said that lots of players would be eliminated when fab costs reached $1 billion and that Moore was a little early. And that seems to be the case. 450nm plant costs are about $10 billion. Who is going to invest - fabs or their customers? Or are they going to split up the investment? Who gets to be favored customers for fabs? And will they have enormous negotiating leverage like Apple which will push foundry margins lower?

    *** Interesting phase for the semiconductor industry. Intel seems to be in the driver seat.

 
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