![]() ![]() “We’ve already done a lot of internal analysis and benchmarking to identify areas of opportunity,” said Grebe. Intel has highlighted before its ambitions to be the second largest external foundry by 2030, which continues to be its goal. In its new model, based off internal volume, the company expects to be the second largest foundry next year – with manufacturing revenue greater than $20 billion. The internal foundry model will highlight new opportunities and lead to an optimized cost structure in furtherance of these goals. Intel’s long-term ambitions are to achieve non-GAAP gross margins of 60% and operating margins of 40%. With the advent of smartphones, the digital network, the intelligent edge, cloud computing and AI, compute demands have diversified,” said Zinsner. “The semiconductor industry and computing in general have evolved rapidly, and we need to adjust our business operations in response. It’s not an entirely new notion for Intel, however today, roughly 20% of Intel’s silicon is manufactured externally. This includes Intel’s internal customers, who will have the flexibility over time to engage with third-party foundries. Intel’s manufacturing groups will face the same market dynamics as their external foundry counterparts and need to compete for volume through performance and price. The new model also provides a tailwind to IFS by effectively creating the industry’s second-largest foundry (by volume from internal customers), allowing external customers to build off Intel’s internal scale and de-risking the process. Intel will maintain the intimacy and deep connection between its product groups and technology development teams, preserving the competitive advantages it has had as an IDM. Intel will extend the use of market-based pricing to its internal business units, offering them the same certainty and stability as the company’s external customers. The internal foundry model offers significant inherent business value beyond billions of dollars in cost savings. In its new operating model, Intel’s manufacturing groups will be accountable to a standalone profit and loss (P&L) for the first time. Beginning in Q1 2024, the reportable P&Ls will include a new manufacturing group segment – inclusive of manufacturing, technology development and Intel Foundry Services (IFS) – along with the company’s product groups – Client Computing, Data Center and AI, Network and Edge, and All Other. The event replay is available here, along with the accompanying slides.ĭriving Value with Intel’s Internal Foundry Model Here are the key takeaways from the webinar. The event’s purpose was to explain the internal foundry model and its many benefits, and share its implications for Intel’s culture, competitiveness, financials – and, ultimately, its transformation. The internal foundry model is also integral to Intel’s multiyear cost efficiency effort, which includes reducing costs by $3 billion in 2023, and $8 billion to $10 billion in cost savings exiting 2025 – which is where the new model plays a significant role.ĭavid Zinsner, Intel Executive Vice President and Chief Financial Officer, and Jason Grebe, Corporate Vice President and General Manager of Intel’s Corporate Planning Group, hosted a webinar on Wednesday for investors and analysts. Intel’s internal foundry model is key to the company’s overarching IDM 2.0 strategy - with the aim to return margins to their historic range and ambitions to serve a far wider variety of chip customers worldwide. ![]() In this new “internal foundry” model, Intel’s product business units will engage with the company’s manufacturing group in a similar arm’s-length fashion that fabless semiconductor companies engage with external foundries. ![]() With these efforts well on track, Intel now is making a fundamental shift in how its product business units work with technology development and manufacturing to ensure long-term growth while achieving efficiencies and cost savings. With IDM 2.0, Intel set out to regain process technology leadership, expand the use of third-party foundry capacity and build a world-class foundry business with a significant expansion of Intel’s manufacturing capacity. Intel is embarking on the most significant business transformation in its 55-year history. As a result, company execs say they are projecting a broad class of increased efficiencies that will be reflected in greater profitability as Intel pursues its long-term ambition to achieve non-GAAP gross margins of 60%. In this new operating model, Intel’s internal product groups move to a foundry-style relationship with the company’s manufacturing group. Intel leaders told analysts and investors during a webinar Wednesday that its transition to a new internal foundry model will be a key enabler to achieving its stated cost savings goal of more than $8-10 billion exiting 2025. ![]()
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