Which one is a better business model?
Scenario A: You raise and spend $10 billion to build a semiconductor foundry. In that foundry, you only fabricate your own internally designed microchips. You do this in a world with Nvidia, ARM, AMD, ADI, TI, Qualcomm, etc. Simply, you cannot expect to have a winning design across generations of microprocessors and broad integrated circuits.
Scenario B: You raise that $10 billion and instead of just focusing on your own internal designs, you open it up for every designer. Yes, fabless chip designers (practically everyone) can access that foundry.
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Scenario B is a better business model. Simply, every winner is your customer and the pressure to win a generation does not matter since if you can win many of the fabless customers, they will have enough products to keep that foundry busy. Scenario A is a bad strategy in a knowledge world because if you do not make the hit design internally, that foundry has nothing to do. Statistically, you have a higher chance of finding a winner in Scenario B than in A.
People, the future of Intel brightens because it has moved into Scenario B: “Intel announced Monday that it has landed a key client, electronics chip designer MediaTek, as part of its early push into offering semiconductor manufacturing services to other companies”.
As Intel moves into this redesign, other leading contract chip manufacturers like TSMC (Taiwan) and Samsung Electronics (South Korea) will see asymmetric competitive attacks. Both Taiwan and Samsung are under the crosshairs of geopolitical paralysis as China and North Korea bark respectively.
In other words, if bad things happen, TSMC or Samsung will be off market, cutting out chips and rattling the world since microchips power our world. Who will use them when you have the new Intel?
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Wow!!! This is long overdue. This is critical for product developers like us. Chip prices skyrocketed this year owing to the rush after COVID and the Ukraine crisis. Glad to know an entity from America, with financial and geopolitical capacity is coming to the rescue.
It’s how a change in business model can transform a struggling business, sometimes it’s capital intensive, other times it’s just a change of approach; but the outcome is always transformative.
Now Intel will offer ‘chip fabrication as a service’, and there are thousands of customers who can design better chips but don’t have capacity to fabricate; that is how innovation happens at exponential rate.