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Comment by dbcurtis | Hacker News Reader

Andy Grove famously said: "We have a simple strategy. We build fabs, and then we fill them."

That is not just a glib remark. Intel builds leading edge fabs, and runs them very well. Then it simply looks at every design it could run, and ranks them by gross margin per wafer. When the fab is full, low margin projects either run on non-Intel fabs or alternatively the teams get redeployed.

And the kind of fab capacity Intel has is a strategic weapon. If Intel decides your corner of the market is going to be paved with silicon, prepare to get paved over.

My take on Intel licensing ARM is two-fold: 1) They have decided the gross margin per wafer of running some ARMs is looking pretty good, and 2) they perceive a benefit of using Intel's fab technology as a strategic weapon to own as much of the ARM market as they want.

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Excellent remark. I'm wondering how they'd do that though. A quick search tells us a standard Intel CPU is in the 200-300mm² range. A server one might go to the 400-600mm² range.

A high-end (higher margin) ARM SoC like the A9x is in the 150-200mm² range. I'm guessing it's the same for qcomm/samsung/lg's offering. How would it be more profitable to go from a $30-$50 SoC to an $300-$900 one ? Even when accounting for processor node differences (negligible between Samsung and Intel at 14nm or TSMC at 16nm), I can't see an ARM chip bringing high-enough margin.

Unless they envision some magical tiny IoT chip that would be expensive ? Or that smartphone SoCs price will continue to go higher? What am I missing ? Are they preparing for the end of the x86 PC/Server market (hence the need to fill the fabs) ?

I think you're touching on something important - the refresh cycle for PCs/Laptops is going to very soon be transitioning from the traditional 2-year cycle to 3-years, and, in the case of desktops, we're going to be seeing people run their systems for 4, even 5 years before considering upgrading. Combine this trend (which I think we can all agree on), with the fact that for a lot of people, their dominant computer is their smart phone/phablet, which is being refreshed every two-years, and you can see that fairly soon (if not already) Intel Fabs that focus on making chips for the desktop/laptop market will be underutilized - and there is a lot of capital tied up in those.

>the refresh cycle for PCs/Laptops is going to very soon be transitioning from the traditional 2-year cycle to 3-years, and, in the case of desktops, we're going to be seeing people run their systems for 4, even 5 years before considering upgrading.

We have been on a 3/5 cycle for the last 10 or so years. (3 year laptop/5year desktop)

We are likely moving to a 5/8 cycle with our current hardware.

> their dominant computer is their smart phone/phablet, which is being refreshed every two-years,

I am seeing less and less people willing to replace their phones on the 18-24 month cycle. The primary reason this occurred originally was cell phone carriers used the "upgrade" to lock people in to an additional 24mo contract. As we see less and less contracts and more people paying for their phones out of pocket or in installments, the replacement window is increasing, I expect by the end of 2017 to see the replacement be 36-48 mos for Cell Phones. This is especially true for any phone priced over ~$350.

Most of this comes down to how long the OEM will continue to issue OS Updates for the hardware, if your phone is getting updates to the OS 36mos after you bought it there is likely very little reason to spend another $400 on a phone. We will likely see some Manufacturers/Carries taking the opportunity to screw over their customers by refusing updates after 24 months in order to extort them into a replacement. Hopefully the market responds to these companies by pushing them to bankruptcy but...

> Most of this comes down to how long the OEM will continue to issue OS Updates for the hardware, if your phone is getting updates to the OS 36mos after you bought it there is likely very little reason to spend another $400 on a phone

I think you have missed the most important issue: phones and tables are not getting to the point where they are useful without an upgrade. I had the first android phone when it came out, and it was just barely usable: I was happy to upgrade once it was paid off. The upgrade was usable, but it needed a little more power. My next phone got upgraded only when it broke, the upgrade is better but it isn't significant for my workflow.

A lot also has to do with the Hardware Support as well. I know our company just buys Applecare for the Laptop, and if something goes wrong with it, employee just brings it in to the Apple Store and gets it fixed, so 3 years is pretty much the outside limit. If your company has internal support mechanisms, they might be able to stretch it out further.

Personally, I consider myself showing self restraint if I don't upgrade my phone on an annual basis, and don't think I've ever gone more than 2 years - but I realize I probably fall into a niche.

>>If your company has internal support mechanisms, they might be able to stretch it out further.

We do, I have probably ~2,000 systems under management, not a single one of the Apple.

We always buy the 3 year extended warranty from the manufactures, and most of the Major Vendors will also sell a 3 year extended hardware support after the extended warrany, giving us 6 years of full hardware support on the systems, after 6 years most of them have been full deprecated by accounting anyway so for year 7 and 8 (desktops only, laptops would have been replaced at that point) we likely just keep a few spares and replace as they fail.

Did you mean to say that none of the 2000 systems you have under management is an Apple System? That would be very unusual for a technology company, where being able to use Apple gear to get work done is a pre-requisite for a lot of engineers considering applying for a job.

The nice thing about Applecare, is pretty much any major city in the world there is an Apple authorized reseller that I can bring the gear in to be replaced. Downside, is there isn't the same type of "Onsite, 4 hour repair service" that companies like Dell offer.

I've got a laptop (2013 Macbook Air) that's up for renewal, but, honestly, it's fast enough that I don't really feel the desire to get a new one until Apple comes out with their new MacBook Pros. For the first time in a long time, I don't feel any urgency to upgrade...

>>Did you mean to say that none of the 2000 systems you have under management is an Apple System?

Yes

>>That would be very unusual for a technology company, where being able to use Apple gear to get work done is a pre-requisite for a lot of engineers considering applying for a job.

Where did I say I work for a technology company? We do have alot of Engineers however, Mechanical and Electrical. None of them use Apple.

Further I assume by "engineer" you mean software developers, I know a TON of devs that will not touch apple with a 10 foot pole. They us Linux or nothing.

Of course I also avoid silicon valley like the black death so....

>Downside, is there isn't the same type of "Onsite, 4 hour repair service" that companies like Dell offer.

This is what we have. We use Dell and Lenovo Mainly

Sorry, I didn't mean to imply that you worked for a technology company, let alone one in the valley. And, agreed, most of our mechanical or electrical engineers use Windows systems - but pretty much all of our software, firmware, design teams use Macs of one form or another.

I don't think there is anyone using Linux as a desktop, (outside of a virtual machine) though we are pretty much 100% linux on the server side (outside of IT) - where we have several hundred servers, and about 800 employees.

As per your example i could never understand why Intel dont fab SoC for Apple. TSMC manage to make profit from Apple with a EST cost of $50 150mm2 A9X SoC. Intel could have fab for Apple only and suck out the money left for Samsung and TSMC. Now not only has Samsung and TSMC grow to build more Fab then before, they also have lots more to invest in R&D.

My guess is that this is all too little too late for the Mobile Market ( if that is what they intended, ) Apple A11 (10nm) and A12(7nm, since it is an evolved 10nm much like the 20nm and 16nm) all this is pretty much set with TSMC.

I see where you're going. Why not kill TSMC and Samsung by eating their revenue source ? Well, simply because Intel's revenue source has much better margins, and it means they can grow (and invest) faster than the competition. Provided they have similar expenses (which they don't).

Also, using their advantage this way by selling at a cost might be borderline illegal (with regards to monopolistic and anti-dumping laws).

Yes, but it wouldn't be at cost, because Intel will be basically providing the same services as Samsung and TSMC, so i dont see law the come in play here.

I specifically mention Apple because not only could Intel work their Modem ( Infineon tech ) within the SoC, it is also the single most important customers on the market. Arguably the only customer. There is really only three major volume Mobile SoC competitor, Apple, Qualcomm and Mediatek. The last one being on the low to medium end market which doesn't fit well with Intel. Qualcomm is an direct competitor to Intel in terms of IP and other cases. Only Apple which fits the bill, and actually will pay for using latest Fab Tech, both Qualcomm and Mediatek has many 28nm design.

To extremely simplify the business: the company who has more r&d and capital spending will, to a large extent, win moore's law's. With current smartphones - TSMC and Intel are about equal in that parameter, and TSMC even beats Intel sometimes . Not good for Intel, but maybe livable.

But now people are talking about augmented/virtual reality. lots of silicon. phones or phone like devices might take a big part in that.LG's chip will probably be for that purpose excatly . What happens if Intel loses that market ? maybe TSMC wins.

I think part of the answer is that intel plan on selling over capacity and making money out what would have been basically unused fab capacity.

The foundries have been consolidated to a select few, and it's been increasingly difficult for Intel to stay competitive on both the design and fab front. People have been talking about when Intel is going to spin off their fabs (or design, depending on how you see it), and I see this as being the first step.

What many fail to realize here, is that Intel is switching strategies to becoming a "dumb chip maker" (as a comparison to ISP's being "dumb pipes").

With Intel's help, now ARM chips will be even more competitive against x86 chips. So far at least Intel had an edge in manufacturing, and even then it couldn't keep up. What do you think it's going to happen now? Well, ARM chips are going to eat into its x86 business even faster.

I'm not saying that this is a "bad" strategy for Intel, just that it could lead it to become just a foundry like TSMC in the end. But it remains to be seen just how well this strategy works, too, as I'm sure Intel will have a lot of "caveats" for chip makers, which will only detract them from using Intel as a supplier of manufacturing process.

I don't know how others feel, but as an Intel investor, I prefer that Intel use the capital they have now (their fabs) to generate maximal profit, rather than speculate on whether alternative ISAs will take over as a result of not exclusively making x86 chips. Your strategy involves foregoing profit now, in order to hopefully make up for it later.

I think you're missing the important point that Intel can take away market share from TSMC using this strategy, thus succeeding regardless of whether x86 or ARM wins in the end.

Maybe so, maybe no. All ARM licensees differentiate by what they add around the core. Intel has the ability to add a lot of interesting things around the core.

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