Intel historic collapse erases US$8 billion from market value

Intel Corp saw about US$8 billion wiped off its market value on Friday after the US chipmaker stumped Wall Street with dismal earnings projections, fanning fears around a slump in the personal-computer market.

The company predicted a surprise loss for the first quarter and its revenue forecast was US$3 billion below estimates as it also struggled with slowing growth in the data center business.

Intel shares closed 6.4% lower, while rival Advanced Micro Devices and Nvidia ended the session up 0.3% and 2.8%, respectively. Intel supplier KLA Corp settled 6.9% lower after its dismal forecast.

"No words can portray or explain the historic collapse of Intel," said Rosenblatt Securities' Hans Mosesmann, who was among the 21 analysts to cut their price targets on the stock.

The poor outlook underscored the challenges facing Chief Executive Pat Gelsinger as he tries to reestablish Intel's dominance of the sector by expanding contract manufacturing and building new factories in the United States and Europe.

The company has been steadily losing market share to rivals like AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel's technology.

"AMD's Genoa and Bergamo (data center) chips have a strong price-performance advantage compared to Intel's Sapphire Rapids processors, which should drive further AMD share gains," said Matt Wegner, analyst at YipitData.

Analysts said that puts Intel at a disadvantage even when the data center market bottoms out, expected in the second half of 2022, as the company would have lost even more share by then.

"It is now clear why Intel needs to cut so much cost as the company's original plans prove to be fantasy," brokerage Bernstein said.

"The magnitude of the deterioration is stunning, and brings potential concern to the company's cash position over time."

Intel, which plans to cut US$3 billion in costs this year, generated US$7.7 billion in cash from operations in the fourth quarter and paid dividends of US$1.5 billion.

With capital expenditure estimated to be around US$20 billion in 2023, analysts said the company should consider cutting its dividend.

Globalization almost dead, says TSMC Founder

Morris Chang , father of Taiwan's chip industry said geopolitics have drastically changed the situation facing semiconductor makers and warned that globalization and free trade are almost dead, and unlikely to come back, reports Nikkei Asia.

Morris Chang, Founder of Taiwan Semiconductor Manufacturing Company was speaking at an event in Phoenix, Arizona, where the company marked the symbolic first equipment installation at its new plant.

It is TSMC's first advanced chip plant in the United States in more than two decades, and Chang said a lot of hard work remains to make it a success.

He compared the current US$40 billion project to when TSMC built its first plant in the US in Camas, Washington, in 1995, just eight years after the world's biggest contract chipmaker was founded.

"Twenty-seven years have passed and the semiconductor industry witnessed a big change in the world, a big geopolitical situation change in the world," Chang said.

"Globalization is almost dead and free trade is almost dead. A lot of people still wish they would come back, but I don't think they will be back."

His comments come amid growing fears that tensions between the US and China over chips, splitting the global tech supply chain into two camps. Washington's crackdown on Beijing's chip ambitions, seen most recently in new restrictions rolled out in October, have made it increasingly difficult for companies like TSMC to serve clients in China.

Chang said he had always dreamed of building a chip plant, or fab, in the United States because of his own background. He was educated and worked in the US for several decades. But his first experience did not go smoothly.

"It was, I thought, a dream fulfilled," Chang said. "But the first plant ran into cost problems. We ran into people problems, we ran into cultural problems. The dream fulfilled became a nightmare fulfilled. It took us several years to untangle ourselves from my nightmare, and I decided that I needed to postpone the dream."

In the decades that followed, TSMC focused on building up cutting-edge chip production capacity in its home market, a strategy that helped the company keep costs down while continually honing its technological know-how.

Chang said the tool installation event -- an important milestone in building a chip plant -- signaled the end of one phase in making its US bid pay off.

"The romance of the beginning is lost and the initial excitement is gone. A lot of hard work remains," the industry veteran said.

But Chang added that TSMC is much more prepared than its first time building a chip plant in the US with the support of the US government.

A large delegation of top chip and tech industry CEOs attended the event, as did US President Joe Biden, who lauded the plant as a win for the US in its push to make cutting-edge chips domestically.

Washington has cited national security concerns and supply issues for wanting to bring vital semiconductor production back to its shores. Many industry executives agree that the era of globalization is retreating, and that sourcing locally is now a top priority.

Lisa Su, CEO of chip developer AMD, told Nikkei Asia on the sidelines of the event that supply chain continuity is now one of the top priorities for companies like hers.

"The entire semiconductor ecosystem is ready to step up and work together. ... The industry has been through so much in the past few years. Having more geographically diversified capacity is so important," Su said, referring to the unprecedented chip shortage. "At the end of the day, what we want to do is ensure that our most important chips have a resilient supply chain."

Apple CEO Tim Cook also embraced the idea of onshoring chip production despite his company for years relying on global suppliers to lower the costs of its designed in the US products.

"Over the past several years, the progress we've made with Apple silicon has transformed our devices. It has unlocked new levels of performance for our users, enabling them to do things they could never do before," said Cook at the event. "And now, thanks to the hard work of so many people, these chips can be proudly stamped 'Made in America.' This is an incredibly significant moment. It's the chance for the United States to usher in a new era in advanced manufacturing."

"Building fabs is clearly very hard work," Nvidia CEO Jensen Huang told Nikkei Asia on the sidelines. "Today's event is marking that TSMC will be a fundamental partner of every company's aim for supply chain resilience. It will make TSMC even stronger. As TSMC increases its own supply chain resilience by building a fab in the US, it will give us resilience, too."

Apple, AMD and Nvidia are set to be among the first customers for TSMC's Arizona plant.

 

 

TSMC to triple US chip investment

Taiwan Semiconductor Manufacturing Company (TSMC) is to more than triple its investment in the United States to US$40 billion to bring the world's most advanced chip production technology to the country by 2026.

TSMC, the world's biggest contract chipmaker, announced to increase its investment in Arizona, where it is building a US$12 billion chip facility, to US$40 billion in order to build a second, even more advanced plant there.

The announcement came ahead of an equipment installation ceremony at the first facility attended by US President Joe Biden and numerous tech industry executives.

The additional facility will begin operation by 2026 and will be the first plant in the US to make 3-nanometer chips, the most advanced currently available, a White House official said.

In line with the expansion, TSMC will increase its workforce in Arizona to 4,500, from an initial plan of 1,600, the company said.

Nanometer size refers to the distance between transistors on a chip - the smaller the number, generally speaking, the more powerful the chip. As the brains of electronic devices, such chips are vital for everything from smartphones and autonomous vehicles to supercomputers and AI technologies.

TSMC's first plant, which is slated to begin production in 2024, will produce 4-nm chips of the kind used for iPhone 14 Pro processors. Once that plant and the 3-nm facility are operating at full capacity, TSMC's total output in Arizona will be 60,000 wafers per month, triple its original plan of 20,000.

"When complete, TSMC Arizona will be the greenest semiconductor manufacturing facility in the United States producing the most advanced semiconductor process technology in the country, enabling next generation high-performance and low-power computing products for years to come," TSMC Chairman Mark Liu said in a statement.

"We are thankful for the continual collaboration that has brought us here and are pleased to work with our partners in the United States to serve as a base for semiconductor innovation."

Apple and chipmakers AMD and Nvidia will be among the first customers buying chips from TSMC's Arizona plant, according to an announcement by the company and the White House, confirming an earlier Nikkei Asia report.

AMD told Nikkei Asia that it looks forward to having its most advanced chip products built in TSMC's Arizona fabs.

Nvidia's CEO Jensen Huang said in a statement that bringing TSMC's investment to the United States is a masterstroke and a game-changing development for the industry.

Biden's decision to attend the equipment installation ceremony underscores the importance of TSMC to Washington's chip ambitions.

Speaking at the event, Biden said America had once had more than 30% of global chip production.

"Then something happened. American manufacturing, the backbone of our economy, began to get hollowed out. Companies moved jobs overseas," he said.

"Today we're down to producing only around 10% of the world's chips, despite leading the world in research and design in new chip technologies. But ... where is it written that America can't lead the world once again in manufacturing? I don't know where that's written, and we're proving it can."

Biden was joined by a who's who of the tech industry, including CEOs from companies such as Apple, Nvidia and AMD as well as top chip making tool companies Applied Materials and Lam Research plus other chip-related players such as Entegris, Synopsys and Arm.

TSMC founder Morris Chang, Chairman Mark Liu and CEO C.C. Wei all attended.

Liu said in his remarks that the plant has the potential to generate US$10 billion in revenue a year and chips produced there could help build advanced electronics products worth US$40 billion a year.

The companies represented at the ceremony are worth at least US$4 trillion, making the event the most important gathering in the semiconductor industry in the post-pandemic era.

In the chip industry, a tool move-in event signals that the installation of essential equipment has begun and is a significant milestone for a chip making facility to become operational.

TSMC's announcement comes as Washington is pushing hard to onshore vital production of semiconductors. In addition to their economic importance, chips are also seen as vital to national security - a sentiment reflected in the latest round of export controls Washington imposed on China in an attempt to curb its semiconductor advancement.

Their importance was further brought home by a global chip shortage sparked by the pandemic and supply chain disruptions, hitting a range of industries.

Rising political tensions between China and Taiwan, the self-ruled democratic island where TSMC is based and which Beijing views as part of its territory, have further accelerated Washington's push to diversify chip production.

Most of the world's cutting-edge chips are built in Asia by TSMC and Samsung Electronics of South Korea.

The US is hoping to change this by offering incentives for companies to build chip capacity on American soil. In July, lawmakers passed the US$52.7 billion CHIPS and Science Act package to boost the domestic semiconductor industry.

In addition to TSMC's expanded investment plans, Samsung is building a US$17 billion plant in Texas, while top US chipmaker Intel is spending at least $40 billion to build chip plants in Arizona and Ohio.

Only TSMC, Samsung and Intel are building or attempting to build chips as advanced as 3-nm, and all aim to put even more advanced 2-nm chips into production by 2025.