The PC market declined 8% last year, according to IHS. In its first-quarter earnings report, released in April, Intel reported an 8% drop in revenue from the fourth quarter of last year. Net income dropped 26%.
Coincidence? I think not. Personal computers have been Intel's primary market for decades, and the company was late to recognize how much smartphones and tablets were eating the PC market's lunch. The company has said it would reduce its workforce by 5% this year. Last month, it said it would close a Costa Rican facility, cutting 1,500 jobs. It also will delay the opening of its Fab 42 in Arizona.
The search for growth and revenue is one reason Intel has been raising the profile of its foundry business over the last year. It entered the foundry business in 2010, taking on a few small customers such as the programmable logic startups Achronix Semiconductor and Tabula. Intel CEO Paul Ortellini downplayed the moves at the time, saying, "We don't see ourselves as a general-purpose foundry."
However, last year, Intel signed Microsemi Corp., a $1 billion company that sells analog and mixed-signal semiconductors, along with Altera, a $1.5 billion FPGA vendor. It also named a new CEO, Brian Krzanich, who came up through Intel's manufacturing organization and is pushing the foundry business. "If we can utilize our silicon to provide the best computing, we'll do that," Krzanich said at his company's analyst day last fall. "People who can use our leading-edge technology and build computing capabilities that are better than anyone else's, those are good candidates for our foundry service."
In fact, Len Jelinek, senior director and chief analyst at IHS Electronics and Media, told us Krzanich started the eight-inch fab in Hudson, Mass., where Intel has been doing small amounts of custom foundry work for a decade.
But analysts differ on whether Intel's goal is to target a specific chip manufacturing niche or go into full-scale competition with general foundries like TSMC. In fact, nearly all of Intel's customers so far have been in programmable logic, an area that doesn't directly compete with Intel processors. (Over on Electronics360, I analyze Intel's foundry activities in more detail.)
It's hard to understand the big picture here, but it seems that the programmable logic business is meshing with the processor business. But whose processor business? The Intel foundry is using its most advanced technology -- a 14-nm, FinFET transistor process -- to manufacture Altera's Stratix 10 chips, which include four ARM Cortex A-53 processor cores. ARM is Intel's chief rival in the mobile chip market.
In March, Intel and Altera expanded their deal. Intel said in a press release: "Altera's work with Intel will enable the development of multi-die devices that efficiently integrate monolithic 14 nm Stratix 10 FPGAs" -- which include ARM cores -- "and SoCs with other advanced components, which may include DRAM, SRAM, ASICs, processors" -- additional processors, presumably -- "and analog components, in a single package."
Though the announcement stressed Intel's assembly and packaging capabilities, I wonder who is supplying those added processors and, for that matter, where the DRAM, SRAM, ASICs, and analog components are coming from.
The Stratix 10 FPGAs are aimed at high-end applications in communications, computing, broadcast, and military markets. Though the press release didn't elaborate, an Altera whitepaper published last summer explains that these FPGAs are aimed at next-generation infrastructure, including datacenters (which need servers with low energy consumption and footprint but high processing power), wired networks (which are going to 100Gb Ethernet), optical networks, and base stations that serve mobile devices (which are moving to LTE). "Customization and flexibility at the hardware level," i.e. FPGAs combined with SOCs, can address power consumption and other problems OEM face in these areas, the paper said.
"Together, both companies are building off one another's expertise with the primary focus on building industry-disrupting products," Sunit Rikhi, vice president and general manager of Intel Custom Foundry, said in the March release.
This foundry deal is about more than just manufacturing work to fill Intel's fabs. It will be interesting to see where it leads Intel in the coming years and how or whether it can replace that declining PC revenue in time.