Commentary: Intel, once king of microchips, is now far behind competitors

TSMC’s library has gradually become the industry’s largest. The best part is that workflow coordination is done online in a “virtual foundry” system that involves performance simulation, computer modelling and instant feedback.

With virtual workflow that improves month after month, year after year, TSMC has steadily neutralised Intel’s advantages.

RISK AND DEMAND

TSMC doesn’t have to shoulder the risks of launching a new product. It just needs to excel in manufacturing, because if a Qualcomm product fails, AMD’s may take off. TSMC can switch capacity from one client to another. Risk is mitigated when demand is pooled.

For chip designers, outsourcing to TSMC has gradually meant they can afford to be fast-moving and bold in product design. If a new chip doesn’t sell, they can pull the plug without having to worry about the factory: That’s TSMC’s problem.

That’s how Nvidia has evolved beyond deploying graphic processors only in the gaming sector; it’s now leading in designing chipsets for AI applications. And AMD, an underdog close to bankruptcy in 2014, now makes some of the most powerful processors.

Intel, meanwhile, still needs to ensure that every product wins with enough volume to feed its network of factories, each costing billions of dollars. This has made the company more and more conservative. And having stuck to supplying chips to PCs, servers and data centres, it is struggling to innovate.

Tellingly, the company’s gross margin – total revenue minus the cost of production – has been sliding for nearly a decade. The biggest danger for a technology company is that it’s not developing leading-edge products fast enough, backsliding into selling commodities.

The big issue for Pat Gelsinger is, how can a company built on self-reliance transform its culture quickly? He is talking about building a foundry service to regain scale in manufacturing. But the question is, how can Intel become a collaborative organisation not in a decade, but in a year?

Andy Grove, the legendary late chairman of Intel got it right. He said: “Only the paranoid survive.”

Howard Yu is the LEGO professor of management and innovation at the IMD Business School in Switzerland. This commentary first appeared on The Conversation.

Article source: https://www.channelnewsasia.com/commentary/intel-chip-semiconductor-shortage-pc-phone-tsmc-qualcomm-2478686