Intel Chips Are in All Laptops, Why Are They Laying Off Employees and Begging for Subsidies Now?
Jakarta, CNBC Indonesia – Intel’s processors or chips have been used by almost all computers and laptops around the world for decades. Therefore, many are wondering why the fate of the American company could change 180 degrees.
Intel is desperately trying to maintain its business by laying off thousands of employees and begging for subsidies from the United States government.
Intel’s condition is so bad that there is news that the semiconductor giant will be acquired by its main rival, Qualcomm. According to a Wall Street Journal source, quoted on Saturday (9/21/2024), this will be the largest and most important in the global technology industry in recent years.
Intel’s current valuation is US$90 billion. If realized, Intel’s acquisition will surpass Microsoft’s US$69 billion acquisition of Activision Blizzard.
Intel has also asked for help from the United States government to approach companies such as Apple, Nvidia and others.
In a recent meeting with US Commerce Secretary Gina Raimondo, Intel CEO Pat Gelsinger voiced his frustration over US companies’ heavy reliance on Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker.
They are asking for US government assistance to persuade TSMC’s customers to switch to Intel.
So what exactly is happening to Intel that is lagging behind its competitors including Qualcomm, Broadcom, Texas Instruments, and AMD?
Intel’s main problem right now is its chip manufacturing business, known as foundry. Intel’s foundry unit is called IFS.
Before establishing IFS, Intel had been focused on developing, designing, and marketing chips. The decision to manufacture chips was part of the United States’ efforts to bring high-tech industries back home.
US companies have indeed lagged far behind Taiwanese company TSMC in the chip manufacturing process. TSMC’s dominance has persisted since the 2008-2009 financial crisis. At that time, TSMC’s founders decided to invest heavily as other semiconductor companies cut capital spending and laid off employees.
As a result, TSMC is now a chip manufacturer for almost all brands, from Intel, Qualcomm, which focuses on designing chips for smartphones, to Apple, which has started designing its own chips for the iPhone and MacBook.
The US government does not want to depend on other countries. With the support of the US government, Intel immediately established three foundry facilities in the US and three manufacturing centers abroad. They also built production facilities for testing and assembly in Asia and Latin America.
However, this ambition was not realized. According to Vox, for example, Intel held back and did not want to spend a lot of money to buy ultraviolet machines. As a result, around 30 percent of Intel’s chip orders were still handed over to TSMC.
Intel lost to Nvidia
The main product whose production was handed over to TSMC was the Core Ultra, which Intel touted as a chip that supports AI technology in PCs. Not wanting to be left behind in the AI business, Intel asked TSMC to speed up production of the Core Ultra so that it paid more.
The problem is, Intel is no longer the sole player in the component business for computers and laptops. Qualcomm, which has been focused on smartphones and tablets, has started to enter the PC business.
This means that Intel’s targeted revenue has missed the mark. The US$ 8.5 billion in subsidy funds is also not enough to cover the widening gap between revenue and costs.
Intel also faces a more fundamental problem. Their research and development capabilities are far behind. Intel CEO Pet Gelsinger, for example, once boasted that he could realize a chip with 5 nodes in 4 years. However, until now there has been no news of any breakthroughs.
On the other hand, Nvidia has been hit by a “windfall” because its GPU, which was previously only used for video games, turned out to be “powerful” as an AI technology engine. Nvidia has been developing its GPU technology since 2018, long before ChatGPT hit the scene.
Although Intel is trying to leave the lag behind, smart device manufacturers have moved on. Apple, which has been a loyal customer of Intel, has started producing its own chips
SOURCE : CNBC INDONESIA