Intel Execs Expect Ivy Bridge to Be Their Fastest Ramp Ever
Intel has three fabs ramping up Ivy Bridge, and expects to build a fourth one later this year. Intel currently runs 15 wafer fabs worldwide. Stacy Smith, Intels chief financial officer, said earlier this month that about 40 percent of the company's capital expenses this year will go toward buildings and fabs.
Jack Gold, principal analyst at J. Gold Associates, said Intels manufacturing capacity, while expensive, has become a key advantage.
While some have berated Intel for keeping its own fabs (at a huge capital cost) in an increasingly commoditized world, we believe the advantage of having its own integrated process capability has brought it significant market advantage, Gold wrote in a research note April 23. Without this capability, it is unlikely it would have been able to so quickly move to mass produce its Tri-Gate transistors using the High K metal-gate technology it also pioneered.
Such high capital spending has enabled Intel to outpace other fabless chip vendors that rely on third-party foundries, he said. The only place the advantage doesnt hold is in lower-end commodity chips, where price rather than performance is key.
Ivy Bridge demonstrates that Intel has effectively leveraged its capital investments, and we expect it to continue to stay ahead of the pack in this regard, Gold said.
Beau Skonieczny, an analyst with Technology Business Research (TBR), said in a research note following Intels first-quarter earnings announcement April 17 that Intels manufacturing costs can cause an initial strain on its financial numbers when it ramps up a next-generation chip, but that the pay off can be worth it.
To fuel higher-capacity shipments of Ivy Bridge, Intel will open three new 22nm manufacturing facilities in 2Q12 to reach a total of four, which will place additional strain on gross margins, Skonieczny wrote. TBR believes the upfront investment in Ivy Bridge production will generate a quicker ramp in supply, which will improve Intels gross-margin performance in 2H12.
Intels manufacturing prowess also has it toying with growing its foundry business, something Otellini alluded to during the April 17 conference call. Intel created its Custom Foundry division about two years ago, and currently has agreements with three small chip makersNetronome, Achronix and Tablua. Otellini would not comment on specific plans for the foundry business, but did note that it not only brings money into Intel, but also creates a learning experience for the company and a proving ground for the libraries and tools it is developing for its own system-on-a-chip products, he said.
The best scenario is to use all of the fabs capacity for Intel products, Otellini said. However, the foundry idea has advantages, also, and he said he is keeping his options open.
Analysts continue to speculate whether Intel, with its 22nm capabilities, might be in line to produce chips for major players, such as Apple or Qualcomm. Jefferies Co. analyst Robert Lea, in an April 23 research note, said Apple, which currently uses chips built by Samsung Electronics, likely will try to find a second chip manufacturer, and that Intel could be an interesting choice.
While we previously thought TSMC was best placed to win the business, we increasingly think Intel is in with a chance, Lea wrote, noting that while Intels foundry intentions are unclear, Otellini did talk about them during the conference call. Intel has plenty of capacity coming on line, aiming to double its fab square footage by end-2013. Intel also has ambitious plans to drive new opportunities in smartphones.
During the call, one analyst asked whether anything prevented Intel from building chips for Apple or Qualcomm, given that those ARM-based chips would compete with Intels own Atom platform.
Well, anything is theoretically possible, Otellini said. The things that would stand in the way with that, both of those, would be the right commercial agreement. I have to say that from ¦ the kind of taste it would leave in my mouth, the Apple win would be a ¦ lot more attractive than the QualComm win.