Intel is doing horribly. You can’t deny that. Revenue is shrinking, the current batch of products they have become less competitive by the day, TSMC is already working on its 2nm fabs, profits are basically non existent, Intel has burned through a ton of cash, the direct funding from the CHIPS Act is NOT enough regardless of what Intel says, new fabs are delayed…things are horrible.
Intel faces bankruptcy or a bailout. Intel cannot continue as it is.
Lets talk about direct funding. The CHIPS Act under the Biden Administration has only given Intel $8 billion in direct funding. Not even enough money to pay for a single fab these days. And yet Intel needs to pay for multiple fabs and will need to invest in new fabs again to stay competitive with TSMC. The world needs ever more semiconductors and Intel was supposed to prepare itself for that. Instead it has fallen further behind. I guess that itself is a good reason to force Gelsinger to resign.
But it is not enough. Intel in truth needs enough cash to add on a fab complex for GPUs, hybrid chips, and the next generation of inference chips. Intel MUST invest now in capacity to meet future demand from AI applications. They have to go above and beyond current ideas about AI needs. You cannot sit on your butt and wait until AFTER there’s demand when it takes so long to respond to that demand. Even just picking a site and building a shell would be meaningful progress towards an AI future. To do that you need money, a lot of it. In truth the Federal Government should have given Intel $50 billion to insure its survival. Enough to finish fabs, enough to begin a future wave of fabs / fab, and enough left over to help them get their shit together.
But of course that isn’t going to happen. We needed a much larger CHIPS Act, and now we need a CHIPS Act II to maintain the United States fragile semiconductor ecosystem. We aren’t going to get that though. If there’s something all Republicans hate it’s direct funding. A Republican Administration and a Republican Congress will not allow direct funding of Intel or any other semiconductor company. It just doesn’t seem like that’s ever going to happen.
What the Republicans will do is ditch Intel. Intel is too big to fail but Republicans will absolutely ditch them. They will split off the fabs, sell them to a company like Nvidia which is seen as a “winner” while Intel is a “loser”, and let Intel’s chip design business die. In their minds the United States already has chip designers, what’s the point of Intel? The buyer of Intel’s fabs probably wont even have a choice. It will be a forced marriage. It won’t matter to Republicans that Nvidia and gang are fabless.
Which strongly reminds me of the banking crisis… when big banks were strong armed into buying smaller troubled banks to keep them afloat. It’s like watching banks die step by step all over again.
The other thing Republicans might do is force an investment in Intel by private companies. I don’t think that’s as likely as just ditching Intel, maybe I’m a pessimist. But it could happen! Republican congressman very well could pull some strings and line up a new investment in Intel to keep it alive. It’ll be a private government rescue.
It could take the form of private equity or even a merger. There are options absolutely available. Government will line something up for Intel. Again I’m being pessimistic about this whole affair. I have difficulty seeing any American company wanting to take on Intel’s fabs. Qualcomm can have Intel’s chips design business, there’s a clear buyer there. But fabs? And it has to be an American company? Yikes.
Intel could also be allowed to go bankrupt. Republicans could ditch Intel in a whole other way. Just let it die and be reborn without its current $50 billion in debt. Again it’s another possibility. I think any kind of “let’s ditch them” plan by Republicans is actually more likely than not.
There’s trouble ahead for Intel and without more funding it is screwed. Whether that funding comes from private companies is to be seen. It’s possible if not very likely that Intel will get more funding from the Federal Government. It’s also possible Intel will be broken up by the Republican Administration and Congress. It’s possible private equity swoops in or a merger happens. It’s possible Intel goes bankrupt. And it’s possible a Republican Congress realizes Intel is too big to fail and does what’s necessary. There are a ton of possibilities.
But the point is that Intel cannot continue as it is and will need some kind of government assistance. In Republican eyes Intel is a “loser” and will continue to be so. They aren’t going to like the options available to prevent a future bankruptcy.