Intel has been a Fortune 500 company for as long as I've been alive,
consistently controlled well over 80% of the PCCPU market for most of the 2010s,
and hit a 20-year stock price high only about three years ago.
But this month, the company lost its spot on the Dow Jones industrial average,
and headlines say they may potentially be bought by another company.
But how bad could things really be for Team Blue?
Did those shenanigans, with their 13th and 14th gen chips being unstable,
really have that huge of an impact on the company? To be clear, as well publicized as those instability issues were within the gaming PC community,
they didn't hurt Intel very much financially. The affected chips represented a relatively small number of higher-end models
for a company that sells mostly mid-range chips to computer manufacturers like the Dells
and Lenovo's of the world. No, to understand how Intel sank into this position, we have to go all the way back to 2015,
when Intel's struggles with making chips on the 10nm process started hitting the tech news.
Hitting 10nm would have meant more powerful and more energy-efficient chips,
which is something Intel obviously needed eventually.
But at that point, they weren't investing in expensive EUV manufacturing technology,
which makes it easier to create chips with smaller transistors.
The powers that be at Intel already took a generally conservative approach
with any significant changes to their manufacturing processes,
but another big part of the reason the EUV investment didn't happen
is because Team Blue just didn't have pressure from competitors back then.
AMD was still struggling with its anemic bulldozer family of CPUs,
and Apple was still buying processors from Intel to use in its Macs.
But not long after 2015, the landscape really started to shift.
AMD's new Zen architecture hit the scene in 2017 and was an almost immediate hit,
and that same year, TSMC, a massive contract manufacturer that now makes Ryzen chips,
started using EUV to make products with smaller transistors.
Then Apple broke up with Intel in 2020 in order to use its own Apple Silicon processors in its Macs.
All these developments meant that Intel was suddenly significantly behind its competitors
in terms of their ability to crank out leading edge chips.
Team Blue finally got its act together somewhat in 2021
when they brought back former executive Pat Gelsinger to be their new CEO.
Gelsinger wanted to embrace EUV, following infighting among Intel board members
over how to modernize its chip strategy. Intel started releasing chips on what they called their Intel 7 process,
which was really a fixed 10nm process that same year,
and started mass producing chips using EUV in 2023.
But the factors leading to Intel's struggles go beyond merely being behind their competitors
in terms of manufacturing. Unlike competitors like AMD and Apple, Intel owns its own fabs for manufacturing its chips,
and these fabs are very expensive to build, run, and maintain.
In order to be profitable, they need to be running at close to full capacity.
However, during this Intel struggle period we mentioned,
some of their fabs were only running at around 70%.
Therefore, Intel was still pouring about the same amount of money into these fabs
that they would have been had they been running at full capacity,
but far fewer chips were coming out of them to sell.
So does this mean that Intel is losing so much money from keeping its fabs open
that the company will be sold off to the highest bidder? Well, not quite.
The situation isn't so dire that Intel is on the verge of bankruptcy,
and Team Blue does have a plan to get their fabs running at full capacity.
One big piece of this is that Intel is going to perform contract manufacturing
for other chip designers at its fabs. Historically, this wasn't possible because Intel's factories used proprietary chip design
software that no one outside of Intel really knew how to use.
However, Intel is moving to industry standard tools for both its existing fabs
and the new fabs it's currently building, which are on track to start producing chips in 2027.
Intel may then try to get outside investors to own a part of its fab business
and operate it like a subsidiary, but the company would have to be in very dire straits for a total spin-off to happen,
like what AMD did back in 2009 with their fabs.
AMD's former fab business is now a separate company called Global Foundries.
Indeed, it's more likely that Intel would sell off parts of the business
rather than the whole enchilada. This is already happening in part as ASUS has taken over Intel's NUC business,
Apple got Intel's smartphone modem technology, and Intel is currently trying to sell a minority stake in Altera,
which is a line of FPGAs. Another Intel department that might be ripe for the taking
is their data center AI business, which is lagging far behind NVIDIA and AMD since Intel was late to the party.
And outside of Intel's plans to write itself,
there just aren't a lot of companies that would have the desire and ability
to buy all of Intel outright. Apple, who has been mentioned as a potential buyer in the press,
has already committed to the ARM architecture rather than Intel's x86,
and they already have a good relationship with TSMC, who manufactures Apple Silicon.
Meanwhile, Samsung's name has also been thrown around, but they're having issues of their own with manufacturing
and would probably face regulatory hurdles, as a foreign company trying to buy a US-based business
that the American government views as critical to its economy,
hence its recent funding of Intel through the CHIPS Act.
So I wouldn't expect Intel to become a subsidiary of some other tech company,
but who knows, maybe one day the Walton family will get bored
and suddenly will have great value brand CPUs on the shelves at Walmart.
Hey, thanks for watching. If you liked this video, check out our other video on why Intel and AMD
are the only two companies making x86 CPUs.