Update on Intel External Foundry Revenue from Q1 2024

 

In December, I published my forecast for Intel External Foundry Revenue. These are sales of Wafers to other companies. Intel has shown "foundry" numbers of $200M-400M per quarter using the previous reporting structure.

I frequently pointed out that MOST of the revenue was from Mask operations and some of it was from packaging. So actual wafer sales of products was less that 50% of those numbers. Making Intel ~ the 20th largest wafer foundry in the world.

With the new foundry finances report out, Intel counts sales (at market price) to Internal groups as "revenue". This allows the product groups to have a P&L reflective of what it would be if they purchased from TSMC or another factory. Intel foundry takes the billions in losses from the fact that Intel costs are higher than TSMC prices. 

My worry was that NOW we wont ever be able to check external foundry wafer sales and it would all be hidden. But we are Blessed to have a 10Q from Intel

Intel Foundry Revenue in Q1: 

4.4B for total "sales" including external and Internal.

$27M in sales to external companies. This includes Assembly, Test, and Wafer Sales. $27M. 

In Q1 2023, the sales to external companies was $118M. 4 times the sales shown here

From the Intel 10Q

"Intel Foundry also includes certain third party foundry and assembly and test revenues from external customers that were $27 million in first three months of 2024 and $118 million in the first three months of 2023"

We can discuss what these numbers mean and what this changes in our model Contact us for more Info. 

Mark Webb

www.mkwventures.com

FIVE fun facts on HBM memory

 

                 As with all hot topics, there are facts and myths. Five HBM Facts:

•       HBM volume is increasing. It was 2% of bits and 11% of revenue. This will grow to approximately 10% of bits over the next 4 years based on current models. The supply growth has to be relatively steady (capacity/designs are HBM specific), but the demand growth will be wildly variable. There are impacts from this supply and demand disconnect.

•           HBM cost is ~3x DDR5 Cost (our model is 3.5x but who is counting?). HBM price is ~6x DDR5 Price. Gross margin per wafer, margin per COS, margin per revenue is higher. Due to overhead of HBM specific designs, testing, and manufacturing, Operating margin can be challenging and needs to be managed.

•       HBM is stacked, packaged, and tested as a unit before going to customer or their contractor for assembly in CoWoS/Foveros type assembly. The packaging of HBM is typically done by the memory company or their contractor. Some recent “cartoons” seem to show memory chip stacking as part of CoWoS process. It is not.

•       In Advanced Datacenter AI systems, Most of the memory bits are still DDR and most of the cost is now processor/HBM module (SemiAnalysis did a very nice presentation on all the details).

•       I think everyone would agree that HBM is THE competitive focus of all memory companies. Current APPROXIMATE models show Hynix with 55% share, Samsung with 35% share and Micron with less than 10% share. The battle to change these numbers is on with Micron looking to double its share and Samsung looking to take its historical position at #1. These battles will cause wild fluctuation in market share and pricing and revenue. You have been warned

 

We have all the numbers on price, cost, revenue and bit volumes. Contact us to discuss more

 

Mark Webb

www.mkwventures.com

Intel Foundry Margins Reported Today

 

Intel released its new reporting structure today. Intel Manufacturing and Intel Product Groups are broken out. The breakout assume that Business units pay market price (TSMC price) rather than Intel cost. 

There are tons of details and specifics in the report out that reflect on the issues. High level takeaways:

1) Intel Manufacturing Costs are much higher than TSMC Price. Intel Costs are 2x the costs of TSMC. There is a reason why everyone uses TSMC and why everyone struggles to compete with leading edge foundries. 

2) Intel Product group has reasonable margins. The pull down in margins was due to using Intel manufacturing. Intel Manufacturing loses 5-7B per year

3) Intel HAD to break out the groups. Otherwise no business unit would ever buy from Intel manufacturing since the costs are so much higher. Reminder: Intel BUs were told they could choose Internal or external for Fabs instead of being forced to use Intel. 

4) The numbers are pretty large. Intel Manufacturing loses 5-7B per year. That is the difference between Intel Cost and TSMC PRICE.  Manufacturing Gross Margins are negative (TSMC Gross margins are 50%+)

5) Intel is starting to clarify that the "turn-around" is not really a 2024, 2025 or even 2026 solution. Pat stated that 18A ramps in 2026 (As we documented). 14A is a 2028 solution. Foundry sales ramp in 2027+. Foundry plans to be profitable by 2030. We can discuss this more with specific numbers

We gave the possible scenarios in a blog post last month (see link). These are still valid and perhaps more optimistic than we thought last month. Some specifics on what can be done:

1) Intel is not an efficient manufacturing company. Fabs are too small, they run too complex processes, they spend too much on engineering samples. This can be helped by doubling the volume with sales to external companies and bringing TSMC wafers home. This is why Intel is doing foundry. Need 2x the volume ASAP.

2) Intel will have leading edge processes again. Its one thing to be inefficient operationally with a leading tech (like in the 2000-2012 time). Being inefficient with n-2 technology is a death sentence.

3) Intel has now clarified the problem for all the public to see. Intel Manufacturing is too expensive. Old technologies have negative margins, New technologies have negative margins. This will eliminate the "business units are too demanding" excuse. Note: I am very well aware of the problems between Intel Fabs and Intel BUs. I also understand why BUs like TSMC. We can discuss this in detail and how Intel can fix this.

4) More volume, more efficient fabs, clear acceptance of the problem. The road is still extremely difficult but this is a start. Intel presented this as an opportunity "we can earn billions more per year if we just match other foundries" 

5) How this impacts the foundry business development will be interesting. 

Future blogs have the numbers and quantitative impact of the improvements the CFO mentioned. by group and by technology impacts. We also have breakout of Fab capacity. 

Call for more information

Links: 

Intel breakout: https://www.intc.com/filings-reports/all-sec-filings/content/0000050863-24-000068/0000050863-24-000068.pdf

Our website foundry Scenarios: www.mkwventures.com

Mark Webb

www.mkwventures.com