“Numerous companies, such as prominent players like Nvidia and Qualcomm, are expected to collaborate with Intel for packaging and/or wafer capacity, a development that appears to be receiving limited attention.
I hold a positive outlook on Intel for three primary reasons: the effective leadership of Chief Executive Pat Gelsinger, the robust ecosystem of the company, and Intel’s ambitious foundry business, which is poised to emerge as a key driver of Intel’s future growth.
Recently, Sam Altman, the CEO of Open AI, attracted significant interest by proposing a budget of up to $7 trillion to establish silicon-chip manufacturing capabilities for powering artificial intelligence. This ambitious vision, amounting to over 20% of the U.S. GDP, resonated globally, emphasizing the current inadequacy in the chip industry to support the development of fabs, data centers, and infrastructure.
Initially, Altman’s $7 trillion proposal seemed extravagant solely based on its scale. However, upon further reflection, the necessity of such an investment to create chips that are exponentially more powerful by the end of the decade became apparent. This monumental undertaking demands substantial investment, prompting considerations on potential partners that Altman might engage.
Leading the Western Chip Manufacturing
Intel’s objective is to become the primary chip manufacturer for the Western markets, while Altman envisions reshaping the global supply chain for AI chips. The convergence of Altman, Microsoft CEO Satya Nadella, U.S. Secretary of Commerce Gina Raimondo, and key figures from global semiconductor companies like Arm Holdings, Broadcom, Synopsys, Cadence Design Systems, and Ansys at Intel’s upcoming foundry event in San Jose, Calif., raises intriguing questions.
The event will feature crucial updates on Intel’s foundry strategy. Despite the significant growth in Intel’s foundry business, with a notable 63% surge in the fiscal fourth quarter, it remains an undervalued asset within Intel’s portfolio, especially when compared to Taiwan Semiconductor Manufacturing Co.’s impressive operating margin of approximately 40%.
While the focus has centered on Intel’s AI graphics processing unit and silicon, the potential partnerships with major players like Nvidia and Qualcomm for packaging and wafer capacity have not garnered sufficient attention.
In my view, the convergence of industry leaders at Intel’s event signifies more than mere coincidence. The escalating demands of AI necessitate expanded capacity and advanced foundry capabilities in the U.S., Europe, and Israel. This event marks a significant moment for Intel, particularly for those who have not closely monitored these developments.
I recently had a discussion with Gelsinger ahead of the Intel event. Although he refrained from commenting directly on the topics to be addressed by Altman or Raimondo, Gelsinger hinted at the immense scale of AI and the substantial performance and power management requirements in the coming decade. The alignment of interests among Intel, government policymakers, and Altman presents a compelling opportunity to address the growing need for AI semiconductors, with Intel positioned as an ideal partner.
The technology and semiconductor industries, along with U.S. policy leaders, recognize the strategic importance of a robust U.S.-based foundry for cutting-edge and AI chips. While Taiwan Semiconductor plays a crucial role, Intel stands out as the key player in expanding capacity for future AI chips.
Daniel Newman is the CEO and chief analyst at The Futurum Group, offering research, analysis, advising, or consulting services to various technology companies including Intel, ServiceNow, NVIDIA, Microsoft, Amazon, IBM, and Oracle. Neither Newman nor the firm hold any positions in the companies mentioned. Follow Newman on Twitter @danielnewmanUV.
