Opinion | How a decision 15 years ago contributed to Intel’s fall from grace today
- Investors sold Intel’s stock and it lost around US$50 billion in valuation, while TSMC saw its market valuation increase by over 50 per cent in the same period
- Apple’s decision to use ARM instead of Intel gave TSMC the learning curve advantage which over time enabled it to pull ahead in manufacturing process technology
Last month, Intel announced its second-quarter financial results, handily beating analysts’ consensus expectations by a handsome margin. Still, investors sold the stock and the company lost around US$50 billion in valuation. Meanwhile, its rival in advanced process technology, TSMC, saw its market valuation increase by over 50 per cent over the same period.
Most investment bank analysts covering this sector downgraded Intel to a “sell” and upgraded TSMC and Intel’s US-based rival AMD to a “buy”. The reason they gave for the downgrade was that in Intel’s quarterly announcement, the company’s CEO revealed an additional six-month delay in Intel’s transition to 7nm (nanometre) manufacturing process technology.
There is a lot to unpack in that news, but the key question is how Intel – which was for decades the undisputed leader in manufacturing process technology, which allowed it to deliver the highest performance and highest margin CPUs for PCs and servers – lost its lead so dramatically? What was it about that delay that caused such a negative sentiment towards Intel’s future?
It is illustrative to go back and examine how Intel got to where it is today and how in the ’80s and ’90s it completely transformed the computer industry to become the standard computing platform across all market segments.
Intel’s transformation from a memory chip company in the ’70s to a microprocessor company in the ’80s set in motion the PC era, with Intel not only supplying the key component, but also setting the standards. Like a conductor of an orchestra, Intel set the tempo for the whole industry to follow.
The result of the industry restructuring from proprietary and vertically integrated computer companies to a horizontal industry, in which Intel supplied over 90 per cent of the microprocessors, was the foundation of Moore’s Law.
