Small Giant Hurts Intel
Giant Chip Company Intel who have dominated the processor market for nearly 30 years is getting beaten up by an unknown giant who knows how to fly under the radar.
Intel who are fast developing a questionable reputation due to processor and production problems is facing its biggest threat in years from unknown processor Company Taiwan Semiconductor Manufacturing who brands are flocking to to manufacture their processors among them is arch rival AMD, Apple Amazon and Qualcomm.
Taiwan Semiconductor Manufacturing Co. was created in 1987 to churn out chips for companies that lacked the money to build their own facilities today it’s a totally different story with some of the biggest device manufacturers turning to the Taiwanese Company to churn out the smallest, most efficient and powerful chips in the highest volumes on their automated production lines.
Another Company chasing Intel business is start up Ampere which is another operation you have never heard of.
“It’s a once-in-a-50-year situation,” said Renee James, the former No. 2 at Intel who heads startup Ampere. Her company is less than two years old and yet it’s going after Intel’s dominant server chip business. That Ampere thinks it can compete is a testament to stumbles by Intel, and TSMC’s ability to benefit from those mistakes.
Bloomberg said that it’s been a decade since Intel faced major competition and its 90 percent revenue share in computer processing will again deliver record results this year. But some on Wall Street are concerned, and rivals are emboldened, because TSMC has a real chance to replace Intel as the best chipmaker in the business. Last year, the Taiwanese company amassed a bigger market value than its U.S. rival for the first time.
What Intel investors really worry about is that the largest internet companies will start making their own chips. This week, Amazon.com, the biggest cloud-computing company, announced its first in-house server processor. The Graviton is made by TSMC, and it supports a new version of an Amazon cloud service that’s more than 40 percent cheaper than a similar offering powered by Intel chips, the company said.
Without TSMC’s capabilities, Amazon wouldn’t have the option to go it alone, according to Matt Garman, a vice president of Amazon Web Services. “More competition in this space is great,” he said.
Bloomberg said that TSMC didn’t catch Intel all by itself, though. The company’s real break came a decade ago when the smartphone began filling consumers’ pockets. Intel dabbled in mobile chips, but the U.S. company never committed its best production and design to the area, preferring to prioritize its existing cash cow PC and server chip businesses.
When smartphone sales took off, phone makers used other processors from companies like Qualcomm. Or they designed their own using ARM technology, like Apple. And TSMC factories churned these components out.
The smartphone business is now almost six times as big as the PC industry by volume. That’s given TSMC the advantage of high-volume manufacturing experience that previously belonged to Intel.
While Intel still outguns TSMC in capital spending on new plants and equipment, the tables are turned when you combine the research budgets of TSMC customers like Qualcomm, Apple, Nvidia Corp. and Huawei Technologies Co.
According to Goldman Sachs, the combined budgets of TSMC’s customers are not only larger than Intel but the gap is increasing. By 2020, they will spend almost $20 billion, according to its estimate, at least $4 billion more than Intel.
“They’re a self-fulfilling prophesy now,” said Debora Shoquist, executive vice president of operations at Nvidia. “They are the best and the best go to the best.”