Just like AMD, Intel also presented at the annual Credit Suisse technology conference and Bob Swan, Intel's CEO, had some very interesting thoughts to share about his vision for Intel. For what I believe is the first time, Bob frankly admitted that he is no longer interested in chasing a majority market share in the CPU side of things, as he believes that to be detrimental to the growth of the company. In what is one of the most honest and candid conversations we have heard, Bob laid out his plan to make Intel a company beyond CPU.
Intel's Bob Swan blames being focused on 90% CPU market share as a reason for missing opportunities and transitions, envisions Intel as having 30% of all-silicon TAM instead of majority CPU TAM
Just a few years ago, Intel owned more than 90% of the market share in the x86 CPU market. Many financial models used Intel's revenue as a proxy for the Total Available Market of the CPU sector. With a full-year revenue of $59.4 billion in 2017, you can estimate the total TAM of the CPU side of things at roughly $66 billion (2017 est). Bob Swan believes that this mindset of protecting a majority share in the CPU side has led to Intel becoming complacent and missing out on major opportunities. Bob even went as far as to say that he is trying to "destroy" this thinking of having a 90% market share in the CPU side and instead wants people to come into office thinking Intel has 30% market share in "all Silicon".
Here is the complete conversation, transcribed by yours truly:
"We think about having 30% share in a $230 [silicon] TAM that we think is going to grow to $300B [silicon] TAM over the next 4 years, and frankly, I'm trying to destroy the thinking about having 90% share inside our company because, I think it limits our thinking, I think we miss technology transitions. we miss opportunities because we're, in some ways pre-occupied with protecting 90, instead of seeing a much bigger market with much more innovation going on, both Inside our four walls, and outside our four walls, so we come to work in the morning with a 30% share, with every expectation over the next several years, that we will play a larger and larger role in our customers success, and that doesn't just an CPUs.
It means GPUs, it means Al, it does mean FPGAs, it means bringing these -technologies together so we're solving customers' problems. So, were looking at a company with roughly 30% share in a $288 silicon TAM, not CPU TAM but silicon TAM. We look at the investments we've been making over the last several years in these kind of key technology inflections: 5G At autonomous, acquisitions, including Altera, that we think is more and more relevant both in the cloud but also ai the network and at the edge, and we see a much bigger opportunity, and our expectations are that we're going to gain our fair share at that much larger TAM by Investing in these key technology inflections." - Intel CEO Bob Swan
A 30% TAM in all of silicon would mean that Intel not only has more ream to grow but is a lot more diversified as well. With the company working on the Nervana processor as well as its Xe GPU efforts, it seems poised to start clawing market share in new markets. Interestingly, it also means that Intel is not interested in defending its older title of being the CPU champion and will actually cede space to AMD where required. To me, this move is reminiscent of Lisa Su's decision to cede space in the GPU side of things to turn AMD around.
Intel CEO: First 7nm product launching in Q4 2021, explains what went wrong with 10nm
In what seemed like a never-ending flurry of hard questions, Bob Swan also candidly answered a question about how Intel got into a position where it has lost a massive chunk of its CPU market share to AMD and is in a position where it is unable to meet demand (this is in contrast to its old philosophy of prioritizing err-ing on the side of caution and always having spare fab capacity):
How we got here is really kind of threefold, one we got a lot faster than we expected and the demand for CPUs and servers grew much faster than we expected in 2018. You’ll remember we came into 2018 projecting a 10% growth and we grew by 21% growth so the good news problem is that demand for our products in our transformation to a data-centric company was much higher than we expected.
Secondly, we took on a 100% market share for smartphone modem and we decided that we would build it in our fabs, so we took on even more demand.
And third, to exacerbate that, we slipped on bringing our 10nm to life and when that happens you build more and more performance into your last generation for us – 14nm – which means there is a higher core count and larger die size.
So those three – growing much faster than we thought, bringing modems inside and delaying 10nm resulted in a position where we didn’t have flexible capacity. - Intel CEO Bob Swan
While most of this is old news, this is the first time that Intel has given a solid reason for why it is not able to meet capacity - namely that it decided to produce smartphone modems in-house which in return meant that they were not able to focus on the CPU side of things. It is also a fairly plausible explanation for why Intel cannot even meet the demand for 14nm anymore and instead has to resort to extending 22nm products.
When asked specifically to explain what went wrong, Bob Swan candidly responded with an admission that Intel had gotten overconfident in its ability to beat the industry standard and suffered the consequence. Calling it "Scar tissue" here is the explanation Bob gave:
The scar tissue really started with Moore's Law. Two times scaling factor every two years and that's kind of the simple rule of thumb. That's worked for a very long time. And the transition from 22 to 40 nanometers and then 14 to 10 we decided that despite the fact the physics was getting more challenging we decided to set a higher bar for ourselves in terms of performance. So the 22 to 14 is not a 2 times density, it was 2.4 and it was bumpy along the way but it worked and that working gave us the confidence that for 14 to 10 why don't we take the scaling factor up to 2.7 when you do that the implications of trying to get more and more density and more and more performance [ you start to see the problem]
Secondly, we're not going to try to do 2.4 scaling or 2.7 scaling as we think about 7 nm, you know, we put 2.0 back in line with historical trends as we think about 5nm, which would be our competitors 3 nanometer...
In our first 7nm product in the fourth quarter of 2021... I would also argue that another positive of some of the challenges around 10 nm is that you kind of learned how to make 14 better along the way and you know, we have 14+, 14++ and and despite the fact that you've been on the same node for four years now performance of the chips that continue to improve as we go to 10. - Intel CEO Bob Swan
With Intel chasing a 2x scaling factor for 7nm and shifting to EUV as well, it seems like the company is all set to introduce its first 7nm products (equal to TSMC 5nm) in the fourth quarter of 2021. Bob also further stated that he expects to hit 5nm (equal to TSMC 3nm) by 2H 2024.
