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Intel Charts New Course with Samsung-Inspired ‘Internal Foundry’ Model to Boost Market Share

Intel, the US-based chipmaker, is betting on a restructuring strategy to invigorate its foundry operations, mirroring the approach used by South Korean rival Samsung Electronics.

The new “internal foundry” model will disentangle its product and manufacturing groups, previously combined, with the intent to bolster the autonomy of the latter. The decision is expected to augment the cost-effectiveness of investments and enhance Intel’s position in the competitive foundry market.

The announcement was made during an investor and analyst webinar on 21st June, wherein Intel detailed its future blueprint that echoes the strategies of existing fabless companies working in tandem with foundries, such as TSMC and Samsung Electronics.

Under the revised model, Intel’s in-house fabless will account independently for the quantity produced, contributing to the foundry division’s sales. Despite this being a minimal divergence from its previous setup, Intel advocates the change as beneficial for financial stability, yielding cost reduction and sales expansion.

The modification in the business structure will separate the entities accountable for design (client computing, data centre and AI, network and edge) and production (manufacturing, technology development and IFS) for accounting purposes. This restructuring is slated to transpire in Q1 next year.

The move represents the second phase of the IDM 2.0 strategy and is on par with Samsung Electronics’ structure, which led to a rise in sales post-establishment of the foundry division.

David Jinsner, Intel’s CFO, articulated the company’s ambition to rank as the world’s second-largest foundry operator next year, projecting manufacturing sales over $20 billion derived from internal volume alone. Additionally, the goal is to climb the ladder as the second-largest foundry operator based on external volume by 2030.

The implementation of Intel’s internal foundry strategy is predicted to cause substantial shifts in the global foundry market share. As per market research firm Omdia, Samsung Electronics’ foundry division reported sales worth $20.8 billion last year. With Intel’s internal volume forecasted to cross $20 billion, Samsung’s foundry market share may drop to third place next year.

The internal foundry strategy is also anticipated to bolster customer confidence by eliminating potential conflicts of interest. Jason Greve, General Manager of Intel’s corporate planning group, explained that by increasing the independence of the manufacturing division, the data and design assets of external foundry customers could be effectively segregated, assuaging fears over customer confidentiality breaches.

Emphasising cost-efficiency, Greve also noted that the strategy could mitigate the need for excessive wafer stepping and quick processing.

Concluding the webinar, CFO Zinsner outlined their aspiration to reclaim transistor and power performance leadership by 2025, which will consolidate their client roadmap and introduce significant enhancements to their data centre roadmap.

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