Intel Planning On Pulling A Samsung

By making TMG+TD+IFS a reportable segment, all internal demand will move to this new entity, leapfrogging Intel to global #2 foundry by Q1'24 instead of by 2030

On June 21, Intel hosted event entitled “Internal Foundry Model Investor Webinar”, details here. The event was designed to provide further information on the company’s long-flagged desire to propel itself more towards a foundry-like model while still retaining its IDM persona.

Curiously, although this was the purpose of the event, we were cautioned at the outset that the speakers would only “touch on IFS” in the webinar, with the real reveal coming in another webinar in the second half:

I would note, today’s webinar will focus on the operational transformation we are undertaking with our Internal Foundry Model. While we will touch on Intel Foundry Services as a part of today’s discussion, we intend to host a much more detailed and exhaustive webinar on IFS in the second half of this year.

It’s hard to watch Intel doing the pre-work for this transformation and not be reminded of what Samsung did back in 2017, details from EE Time here:

From a foundry perspective, Samsung had long been treated with some suspicion as a result of the fact that they operated as both a foundry supplier and a competitor for the very same products they produced on behalf of their customers. This was, after all, the reason Apple dropped Samsung as a supplier and launched seven year legal battle against the company commencing in 2011, details from The Verge here.

With the benefit of six years to observe the impact of Samsung’s decision to spin out its foundry operations, it’s really hard to see how its made that much difference.

According to TrendForce, back in 2017 Samsung had a 7.7% share of the global foundry market, details here:

Today, according to Counterpoint Research, Samsung has a market share that oscillates between 13% and 15%.

Six years to roughly double their market share starting from such a low base is not exactly a stunning performance. Furthermore, that market share has come at the expense of the smaller foundries, not the #1 target Samsung was aiming at, i.e. TSMC.

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Indeed, there may be a lesson for Intel to take on board here. If Samsung is anything to go by, launching (or relaunching) a global foundry domination effort is far more likely to grow by taking business from the smaller foundries rather than from TSMC. This has implications for the kinds of process nodes a newly emerging foundry player should be planning to offer…

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To make matters worse, despite the “spin off” of their foundry business, we remain in the dark regarding Samsung Foundry’s profitability given that the company only provides an operating profit result for the DS division without splitting it out between foundry and memory.

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I’m not postulating that Intel’s restructuring itself to be foundry-centric is identical to Samsung’s gambit back in 2017, but there are surely a lot of similarities. Judge for yourself how successful Samsung efforts were in the intervening six years and apply a similar thought process to how things are likely to pan out for Intel.

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With this Samsung mini case study as a backdrop, let’s examine what Intel had to say on this latest webinar. As we go through it, investors should ask themselves key questions such as “why is Intel doing this in the first place?”, “are there alternative methods to achieving the same end result? and “what might be some pitfalls that Intel may experience along the way?”. Let’s dig in…