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Intel is considering outsourcing chip manufacturing. The move marks the end of a chapter for the semiconductor sector. American chip foundries no longer dominate.

It matters for the PC sector. Yet the implications go much further and could affect international trade, even politics.

Intel was the world largest chip maker for decades. Although it didn’t always have the best designs, it had the best sellers and the key relationships. The company’s ‘Wintel’ partnership with Microsoft defined the PC.

Apple’s role

When Apple switched from PowerPC to Intel, the dominance looked complete. That relationship lasted 20 years. Now Apple is moving back to its own processor designs. This means Apple can build faster computers and lighter laptops. Devices will be slimmer or have a longer battery life.

Intel was one of America’s key industrial giants. It continued to make chips in the United States long after other manufacturers, including high tech companies, moved their factories off-shore or outsourced to Asian factories.

In its prime the chip giant seemed incapable of making an error. It was relentless.

Economies of scale

One reason for Intel’s might was the economies of scale. The first of a new line of processors would cost hundreds of millions of dollars to build. Towards the end of the run, it could measure the cost per-chip in pennies.

Scale meant it got the best engineers, the best scientists.

And then it all stopped. Apple’s iPhone was the turning point. Intel missed out on making chips for mobile phones and tablets. Instead computer makers turned to companies like Qualcomm. Apple decided to design its own.

Either way, Taiwan Semiconductor Manufacturing Company or TSMC, got to make the chips. It became better at the job than Intel. If Intel does outsource manufacturing, TSMC is the most likely candidate for the job.

TSMC now makes more processor chips than Intel. It has the economies of scale. It has sharper skills, competitive pricing and everything needed to be market leader. At least when it comes to making processors.

Intel’s designs remain first class. But its rivals have caught up. Take AMD: For years it trailed far behind Intel. That’s changed. AMD’s Ryzen can deliver better performance while using less power than Intel processors.

Intel slow to 7nm

Unlike Intel, AMD is working with 7nm technology. That is, more advanced chip technology. We need to be careful here, 7nm refers to the size of chip components, but different chip makers have nuanced uses of the term.

If losing Apple wasn’t enough, last week the company announced it would delay moving to its 7nm process. The company slipped behind when it was late to market with 10nm technology. Now the 7nm line is at least 12 months behind schedule.

Intel isn’t going away. It managed to grow revenue 20 percent in the last quarter. The company sold almost US$20 billion worth of kit. Even the PC chip business, that’s the bit everyone worries about, was up seven percent.

Yet, it does look as if Intel is no longer the world’s leading chipmaker. It’s brand is no longer a name to conjure with.

11 thoughts on “Intel chip dominance ends not with a bang but a whimper

    • …like IBM, 20 – 30 years back.

      It was still making huge money and was the 800-pound gorilla, but it had lost technology leadership. Intel’s future seems clear at this point.

  1. To me, Apple’s move to iPhone-like hardware isn’t about longer battery life (how boring is that?), but about pressing on with Steve Jobs’s vision of a useful computer.

    The dynabook concept and Neal Stephenson’s novel “The Diamond Age” represent the vision.

    Phones are stuck at a plateau: they haven’t introduced new functionality for a few years now. Just more, faster, shinier but really, just same old same old. (I’m waiting for the XKCD cartoon chart of number of cameras on an Android phone vs time: 61 cameras in 2037?)

    Back to Apple. With software developers using platforms with “advanced audio processing, enhanced camera, AI and neural engines” (from the SoC block diagram at the announcement) it will be a lot easier to develop the next generation of functionality for phones that use the same hardware.*

    An example of what I think Apple is working towards: “Hey Siri, write up minutes of the meeting we just had, and email them to everybody.”

    To do that Siri has to be able to remember the last few hours’ audio, know who was present, figure out when the meeting started and finished, know what was relevant out of what was said, and be able to summarise it sensibly. All on the phone device.

    We’re a long, long way from there, but I think that is where Apple wants to go.

    Intel was getting in the way.

    The only group of Mac users Apple cares about these days is people developing software for Apple’s main product, the iPhone. Hence the relative stagnation (compared to the iPhone) in Power Macs, Mac Minis, Macbook Airs, and even Macbook Pros over the last decade. Other people have been able to use Macs — and they’ll still be able to — but Apple won’t be trying to woo them.

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