Intel Earnings. What does the future REALLY look like?

 

Intel announced earnings for Q4 2022. The earnings were not great and the guidance was horrible.

Q1 2023 Projections

Revenue 11B, GM 39%, EPS of (-.15) . This INCLUDES the impact of Intel change to depreciation from 5 years to 8 Years in order to make earnings look better…. For the first 5 years. Then it becomes problematic

Status

Intel continues to lose ground. Pat blames macro but Intel is performing much worse than the macro and worse than its main competitor. It is possible that the Intel (and AMD) sell in to the OEMS is much lower than OEM sales due to inventory burn off. .... But Intel said three months ago …. 1 month into the quarter…. That Q4 was low point. They were wrong, so we need ask whether Intel is losing share faster than expected. A look at GAAP impacts and businesses like the graphics group shows additional concern.

Intel’s plan is to spend a lot of money on product development while eliminating jobs. They claim they will build many fabs (6-8??) over the next 3-5 years. This is a great plan but it is not clear that any company can go from trailing in technology to leading while losing money, losing cash, losing market share, and losing employees.

So the question is: What is the Intel claimed future vs the realistic future?

 

What Intel Claims: 5 nodes in 4 years: Intel still claims to be on track. Since Intel 3 will not ship until Q4 2023 in volume at the earliest, It appears intel plans to ship and ramp 4 nodes in 2 years. This seems impossible, even though two are half nodes. Aside from process, that would require a collision of new product announcement and ramps.

What will happen: IF Intel executes flawlessly and they achieve they goal, the new nodes will ramp slowly and will not be more than 10% of the wafer starts at launch. This might be a good strategy, but it will lead to multiple parallel products on parallel nodes.... which is always difficult to manage.

If nodes or products are delayed, the roadmap and process ramp will fall apart. and this becomes a problem since Intel 4/3 are learning nodes for EUV and Intel20 is learning node for GAA. Short answer they must execute flawlessly (We can provide milestones and probability of success to see if this is happening and impacts if it does not.) But Intel 7 might be a dominant node like 14nm

What Intel claims: Intel will be number two foundry in world in 2025+. Intel want to build 6-8 factories to become a dominant foundry (in parallel with Arizona, Israel, Oregon internal factories). Intel has design discussions with multiple foundry customer and some test chips planned or running. Intel is building two factories now in Arizona and is doing site prep on Ohio. They have plans for Germany/Italy.

What will happen: The Plan was made to get major customers to sign with Intel and show they are serious (good idea). However it was high risk to begin with due to spending and the fact that Intel is not a major foundry today. Now that Intel financials are dropping, cash flow is negative, and the fact that you need to build it and spend billions before getting revenue.... it is not mathematically clear how this is possible. 

We have the details what the actual roadmap and timing for each fab will be (call us) ....  but when the smoke clears, expect ONE  factory in Arizona to tool out in 2024 and the rest to be slowed until Intel achieves revenue from foundry. Intel needs to get to be number five in the world (not an easy task) before being number two. IF everything goes well, Intel will add 1 wafer fab every year after 2025. This is about 25% of what they have promised multiple government entities.

We can discuss impact of Brookfield, subsidies and possible JVs to add more scenarios.

 

What Intel Claims: Cutting spending by 3B this year and 8B in 2025. If the plan is to change the accounting so that depreciation is now 8 years (Increasing cost dramatically years from now), then this is possible. If starting less silicon and lowering revenue is the way planned, this is possible. If taking all the write offs, reorgs at once, saying it is non-GAAP, then saying expenses are lower later…. This is possible. BUT actually reducing spending 3B while getting revenue to 2021 levels seems difficult. 

 *What will happen: Intel will cut headcount and some spending to claim 3B is reduced spending but they will not be able to show it on P&L as other spending went up. Expect big differences in GAAP vs non-GAAP (We can show the impact of layoffs on spending including severance pay and fab cost reductions). 

A positive note: What Intel needs to do to be successful:

Slowly move into foundry. Do actual foundry work before adding more fabs. Major customers are not going to run significant wafer starts at unproven foundry. Also, customers are allowed to cancel orders so have backup customers to fill factories like TSMC does

Get product roadmap competitive and hit all milestones. No changes or excuses

If you don’t succeed in graphics, stay out. Intel strengths (methodical and dominant leader) does not match graphics market. Focus on what you do well … processors and architecture for Datacenter and Client.

Be aggressive on Datacenter, paranoid on PCs. Datacenter will grow forever. PCs might hit 300M TAM.... but there is a good chance they will not.

Do this and return to be a profitable cash machine who leads in PC and Datacenter architecture.  

 We have lots of details and milestones so you can track Intel progress. Call or text for more info

Mark Webb

www.mkwventures.com

Emerging Memory Revenue Through 2032

 

Emerging Memory Revenue. Optane drops off and slowly MRAM grows. 

Emerging Memory Revenue will actually drop over the next few years as Intel Optane sales slow. Discrete revenue from MRAM  plus small contributions from FERAM and RRAM will slowly replace it. 

Emerging memories need to focus on two areas:

1) Embedded where they are BETTER than other memories. Replace ALL eFLASH now!

2) Niche markets where the speed of MRAM etc is BETTER than other memories. Again, NOR/eFLASH is a great target. Along with Caching for storage and LLC for compute systems.

There is one other possibility we continue to monitor this week. a new memory where the difference with existing memory process technology (DRAM, NOR, NAND) is less than 20%. If you can "bolt it on" it can work. this is how FLASH came from EPROM and how NAND came from NOR. IEDM is  great place to review this and ALL memory companies are trying their best to implement this.

Unfortunately, it is not financially possible to replace DRAM or NAND with "new memories". And most foundries and major memory companies already have their emerging memory candidates for the future.

Emerging memory is GREAT for new applications, NOR replacement and Cache. It is poor for trying to replace DRAM or NAND.

See our presentations at www.mkwventures.com, Markets, revenue, and the lessons to be learned from Intel Optane.

Call or text to discuss!

Mark Webb

www.mkwventures.com

An Intel Foundry Business Scenario

What will Intel foundry business look like?

Intel broke ground on New Arizona Factories a year ago and followed with announcements for factories in Ohio, Germany and expansions at all existing factories. If we add up the Capex, we are talking $100B in the next 5-6 years and commitments to $200B in next 10+ years. This is all in addition to the ~20B per year to support new technologies in existing Fabs

Intel Stated that they will release 4 Nodes in 5 years and will ramp foundry to have billions in revenue in 2025 and compete with Samsung/TSMC in 2030

Intel announced partnerships and financing with investors and is looking for massive government support

This is great aspirational leadership by Pat Gelsinger. "We are the greatest Semiconductor company ever, we can dominate Foundry" Unfortunately there are some challenges.

1) Intel claims foundry revenue of $600M per year. This is not wafer foundry work. This includes mask making and tool sales. Actual wafer sales are less than $350M per year. Which means Intel will need to grow 10x to pass HH Grace in revenue to be in 6th place .... and it will be half the size of SMIC at that point. 

2) Intel is purchasing Tower which is a great company and will provide excellent mature foundry capability. But Intel wants to focus on leading edge which Tower never works on. 

3) Intel has committed the Fabs so customers can believe Intel could have tons of capacity. But to get that capacity intel needs to spend 20B+ before wafers start. If you build it, they will come. If they don't come, Intel will collapse. If you don't build it, they definitely wont come. Paradox

4) The is no chip shortage on advanced foundry. If Taiwan get invaded, the market either continues under PRC politics or Electronics collapses (Foundries exist other places... but systems and packaging assembly.... its mostly in China and Taiwan. If there is a China war, Intel could end up being the victim due to no PC, Server, networking upgrades (we all use old stuff)

5) Intel was counting on spending all its huge earnings on capex. Then the PC market dropped and Intel lost Datacenter Share to AMD. Cash Flow is VERY negative.

There are other challenges to Intel and insights that we can discuss in person or on phone.

So what will actually happen:

1) Intel will clear land and potentially build shells for new Fabs (6-8 of them). This will happen at a slow pace and trickle into 2024

2) Intel will try to convince customers to not only sign with Intel but actually pay money up front for capacity. Signing without volume commitment is easy. Apple qualifies and signs with suppliers all the time and then awards supply to others. Everyone needs a backup. Intel is a good backup. Why someone would pay in advance is not clear.

3) Assuming Intel delivers on Intel 4, 3, 20, People will commit small amount of volume to Intel sometime in 2024. The sum total will be about 25K wafers per month in 2025 up to 60K+ wafer per month in 2026. This is less than one fab. This is well below Intel forecast but is actually quite good for a new foundry. As usual, that is the issue.... separating reality from hype.

4) One Fab will ramp in 2025 with others delayed and on hold. 

5) Intel will ramp other sites and fabs IF business continues to grow. Intel will cancel/delay indefinitely over half the fabs and or sites. Intel needs to grow 10X faster than TSMC or Samsung. TSMC and Samsung Factory ramps in US are good benchmark to measure Intel against

What would my my scenario wrong and Intel successful???

1) Intel actually executes on Intel 4,3,20 on time with leading cost. It is better Faster Cheaper than TSMC.

2) TSMC/Samsung is unable to deliver for companies at the leading nodes on time

3) Government passes laws requiring people to buy from Intel. 

These are just scenarios and far from what Intel claims will happen. BUT...

That's the beauty. WE provide milestones so YOU can decide if Intel is on track. You can judge whether people are committing to Intel or not. We even throw in timeline tracking of Intel factory builds and pictures and tool installs 

As a Employee of Intel for over two decades, I would love to be wrong and see Intel dominate technology like they did in the old days (ie when I was there).  

Set up a meeting and we can discuss how this will play out and we can provide you with milestones to track. We are at IEDM all week.... call or text

Mark Webb

www.mkwventures.com

Memory Costs Through 2030

 At 2022 FMS we showed costs for all memories including Emerging through 2030.

We have details in spreadsheets by company and the reasons for the cost trends and scenarios to watch for if things change in the future. Call or text for more info

All presentations are on our website www.mkwventures.com

Number do not include packaging , test, and some access overhead. We have those details in the spreadsheet as well

Mark Webb

www.mkwventures.com

When Will NAND/SSD Costs Be Lower than HDD?

 This is the age old questions with the assumption that HDD will stop scaling and NAND will scale quickly

The answer is 2034! Maybe!

The HDD has a few tricks to pull out and NAND is not scaling like it used to.

We have details on this and DRAM, MRAM, ReRAM, etc at FMS 2022

Mark Webb

www.mkwventures.com

Optane Future and Implications for Emerging Memory

 

UPDATED: Optane persistent memory has been in mass production for years now and provides large memory pools and persistent memory for many applications. In many aspects, it is exactly what we wanted from emerging memories when they were just a goal 10+ years ago.

UPDATED:

The memory is faster than NAND and cheaper than DRAM

High density

Non-volatile

Intel has multiple products and is heavily marketing it.

It sells more bits than all other emerging memories combined

Its could be defined as "wildly successful"

But Intel officially CANCELLED it after months or rumors. The world most successful Emerging memory failed. 

It did not Fail due to lack of money, lack of ecosystem, lack of support, or technical issues. It died because the market does not support advanced new memory tier. Less than 5% of servers planned to use the PMEM. 

If the world most successful emerging memory, with 100s of millions of dollars in sales and billions in investment is killed despite meeting goals, what does this mean for other emerging memories and future technologies. We will discuss at FMS 2022

• OMEM-202-2, MRAM/PCM session 
• Wednesday, August 3 4:45pm - 5:50pm 

Please call or text to discuss Optane and other Emerging Memories in detail in a 1:1 Sessions

Mark Webb

www.mkwventures.com

Mark Webb MKW Ventures Consulting at FMS 2022

 

We will be at Flash Memory Summit Aug 1-4 with Presentations and discussions on multiple memory areas. 

The future of Emerging memory markets including Optane will show how the market is much different than we believed 5 years ago. A second presentation will show costs for all memory technologies including DRAM, NAND, MRAM, Optane, ReRam through 2030!

Presentations

A New Scenario for Emerging Memories and Markets

We have a number of viable memory technologies in Optane, MRAM, and ReRAM that are capable of production. However all have struggled to meet their growth goals financially. This includes Optane which has 100s of millions in revenue but appears to no longer be part of Intel's long term goals and is not releasing new technologies. MRAM products are out but not growing at a significant pace. Embedded is a great possibility but that is part or the foundry business. What should existing memory technologies and future memory technologies focus on?

Scaling and Cost Forecast for DRAM, NAND, and Emerging Memories

We show Scaling plans and cost for DRAM and NAND technologies and present models for Emerging memory costs. DRAM and NAND will continue to scale though 2030 and costs will continue to reduce. Companies will make pragmatic decisions on how much to scale and when. Optane, ReRAM, MRAM will scale but cannot compete on cost with NAND or DRAM long term. We show costs over time for all of these and what the implications are of the cost trends. Our cost overview shows trends but we have detailed company by company costs for follow up discussions.

Mark Webb

www.mkwventures.com