Intel CEO Kissinger talks about why we need foundry services and its differences

Compiled from seekingalpha

Chip giant Intel has always been the focus of industry attention. However, a puzzling question is why Intel chose to make such a huge strategic change and investment, not only continuing to manufacture chips for itself, but also opening up its foundry business to manufacture chips for other companies? For Intel, this is not the first time it has tried the chip foundry model, but the previous two attempts ended in failure, which undoubtedly increased the complexity of its decision-making.

Fortunately, I had the chance to sit down with Intel CEO Pat Gelsinger in advance of this week's IFS Direct Connect, Intel's first event dedicated to its foundry business. He explained to me the reasons and goals behind the company's strategic decision.

It turns out that packaging technology played a key role in Intel's decision. Packaging technology enables multiple chiplets to be combined and interconnected into larger, more complex systems on a chip (SoC). As Gelsinger said: “We are developing wafer-to-wafer-level assembly technologies with very advanced capabilities. We have decades of experience in these areas, and our leadership in this area is now paramount. It’s important.”

Intel invited many industry heavyweight guests to this event, including Microsoft CEO Satya Nadella, Arm CEO Rene Haas, OpenAI CEO Sam Sam Altman, U.S. Commerce Secretary Gina Raimondo, and executives from MediaTek, Broadcom and other companies. This strong guest list demonstrates that the new resources Intel foundries are bringing to market have attracted widespread industry attention.

Intel and Gelsinger refer to this type of functionality as "system-level foundry." Amid the increasing complexity of modern chip designs, assembling the most complex and powerful semiconductors requires more than just the latest and smallest process technologies. "We found that everyone needs advanced packaging technology, and it has become a foundational product, not just something we can do," Gelsinger said.

To be clear, Intel has also made significant progress on traditional processes. In fact, the company is expected to discuss the latest developments in its five-node-in-four-year (5N in 4Y) program launched two years ago at this week's event. However, packaging, interconnects and other elements that allow the creation of “systems on a chip” play a key role in providing unique advantages and significant opportunities.

Taking NVIDIA as an example, Gelsinger pointed out: "NVIDIA is currently unable to provide twice the number of GPUs the world needs. This is not because of silicon problems, but because of packaging technology limitations." He believes that the world may soon need a large number of For advanced artificial intelligence accelerator chips, packaging capabilities and system-level thinking will become particularly important. Future AI chips will use multi-layer 3D packaging technology, with cache and memory arrays and chiplets on top. These chips may need to be connected to the base chip through hybrid bonding or other means and interface with interfaces such as UCIe. In addition, you need to have all the drivers and basic software-related functions to make up a complete system. These are just some examples of what next-generation system foundries will need.

Gelsinger stressed that Intel is willing to share the intellectual property and expertise it develops in creating its own chips with its foundry customers. "Our customers are already doing this advanced packaging design, and our expertise on how to combine these will be fully available as part of our foundry services offering," he said. This is Gelsinger's latest move to build a foundry business within Intel. part of the changes made in the attempt. In addition, the company is working on easier integration with the entire chip design industry, especially with EDA software companies such as Cadence and Synopsys. In the past, Intel has been a highly vertically integrated company, but now it's changing that. "In the past, you had to make a huge effort to learn all of our proprietary tools and processes," Gelsinger said. "But now, our partnerships with companies like Cadence and Synopsys are critical."

While Gelsinger admitted it's too early to tell, he did say the approach they're taking and the emphasis on packaging and system design is taking them beyond their early foundry efforts. He said: "Our transaction value has exceeded US$10 billion, which is several times higher than in the past. Our revenue, number of customers, etc. are also far beyond what was part of our early efforts."

In addition to the practical needs and design requirements for advanced packaging technologies, Gelsinger noted the evolving economics of modern chip design and manufacturing. He said: "If we go back five years, in the bill of materials, 15% of the cost of developing a leading CPU will be packaging, assembly and testing. However, when we get to the use of these 3D building technologies When using one of the modern chips, such as Gaudi (Intel AI accelerator chip) or Granite Rapids (future Intel server CPU), packaging, assembly and test costs have now reached 35-40%. So, from the packaging and test layer, the product's The total value is getting higher and higher.”

Of course, another reason Intel is pursuing this foundry model is the lack of geographic manufacturing diversity in the chip business and the harsh realities of today's geopolitical environment. At present, more than 50% of the world's semiconductors and about 90% of the most advanced chips are produced in Taiwan by companies such as Taiwan Semiconductor Manufacturing Company (TSM) and United Microelectronics (UMC). Therefore, geographical diversification of where chips are produced becomes extremely important. Governments have begun formulating huge plans to provide financial support for domestic chip manufacturing activities, including the US$52 billion CHIPS Act. The bill has already begun disbursing the first batch of funds to support domestic manufacturing development.

Gelsinger hopes to use the funds to boost Intel's foundry business and narrow the economic gap with Asian countries in chip manufacturing. He said: "Asian governments have provided heavy subsidies to the semiconductor industry for three decades, and now we are 80% dependent on Asia. If we want chip manufacturing to return to the United States, Europe and other parts of the world, we must close the economic gap." However, the facts The process of obtaining these funds has proven to be much slower than expected. Kissinger expressed disappointment: "When I stood on the White House lawn signing this bill, I never imagined that I would be sitting here today telling you that I have not seen a penny." These funds are very important to Intel. Important because they will be used to invest in building factories, purchasing equipment, and developing new technologies; these investments are necessary to achieve foundry business goals.

Despite the many challenges and uncertainties, Gelsinger is optimistic about the future of Intel's foundry business. He believes that packaging technology and system-level thinking will become the key to future competition; Intel has unique advantages and capabilities in this regard. Of course, achieving this goal is not easy; it takes time, patience, and consistent effort. But Gelsinger seems ready and determined to lead Intel to success. He said: "I feel like Congress has made a commitment to me; Parliament and the EU have made a commitment; but you know at some point our board is going to say 'OK, Pat; that's enough'. So we've got to hurry. Time to act and show our results.”