CODEX
Should new leadership change your mind about investing in Intel?
This has been quite the week for tech enthusiasts, with several new products announced by Intel, AMD, and Nvidia at this year’s Consumer Electronics Show (CES). But what actually moved the markets wasn’t really any of the tech announcements.
Last week I wrote a story about how it would be impossible for Intel to compete with the incoming onslaught of competition from AMD, Qualcomm, and most of all, Apple. Over the last few years, intel has had several delays with the rollout of its 10nm chips, which have been to a large extent due to problems with their manufacturing process. When they finally started rolling out their 10nm chips this year, the additional value for the consumer was at best, incremental.
Meanwhile, AMD has come out with desktop processors that are more or less on par with Intel’s at a lower price point, and their laptop processors announced at CES this year are following suit.
To make matters worse Apple, tired of Intel’s constant delays, back in October announced that they would be phasing out Intel processors completely from their laptops by 2022. They revealed their own M1 chip two months ago a variant of their powerful iPhone and iPad chips modified to run on the Mac bringing unprecedented benefits in horsepower and power consumption.
The shakeup.
With several new competitors on its heels, Intel’s stock has vastly underperformed over the last year. In December 2020 it was trading at pandemic lows again, while the rest of the sector had seen new high after new high almost every month.
The need for change has been evident for a while now. It had gotten to the point where back in December investors were writing open letters to Intel asking it to outsource its manufacturing. Whether Intel listened remains to be seen, there definitely have been rumors substantiating that, but the potential benefits are unclear.
It seems that the need for change was evident to Intel as well and they started this week by announcing a change in leadership. Their CEO would be replaced by an engineer and the former CEO of VMware Pat. Gelsinger.
This leadership shakeup is definitely a step in the right direction but is it really enough to save a sinking ship? The market definitely seems to thinks so. When the news was announced Intel’s stock flew by 10% and AMD’s stock pulled back by 5%.
Is it enough?
Despite what the market seems to think, a change of leadership doesn’t change the state of competition. The chip sector has for the most part moved on and Intel has been left behind.
TSMC and Samsung have moved on to 5nm and by next year they will be at 4–3 nm while Intel is still at 10nm. But the problem isn’t only because they are coming in last in the nanometer race. It’s because the sector is seeing incredible improvements beyond the size of nanometers and Intel is nowhere to be seen.
Looking beyond the fact that Intel missed the mobile chip boat completely letting ARM surpass x86 chips in performance and energy consumption. Much of the advancements that we have seen in chip technology over the last years have been because of a change in architecture. ARM chips now come with differentiated and specialized high-performance and energy efficiency cores, integrated graphics, unified RAM as well as a specialized neural engine. Apple’s ARM processors are giving Mac’s performance and energy consumption that Intel was never able to deliver with their year over year incremental improvements.
The most important point though is that Apple has been using these chips for a decade now, since the release of the A4 chip that was used in the iPhone 4. They have built their devices around these chips since the very beginning, increasing integration with every iteration. Even if Intel was to go into ARM competing chips now, it would take them years to design them build t, em and most importantly get support from Windows. At the same time at Cupertino, everything is designed in-house, chips, operating system, and computer. Too many things need to fall into place for Intel at the same time across different companies making the task almost impossible.
Finally, I think Qualcomm is better suited to meet the incoming demand of ARM processors for Windows computers and I go into this a lot more in my story from a week ago.
In my opinion at this year’s CES Intel under-delivered once again. They announced several new processors bringing for the most part incremental improvements. Improvements that hardly keep up with AMD, which has been leaping leap every year and all these at the precipice of a potentially revolutionary new wave of ARM chips that are about to flood the laptop market in the next few years.
TL;DR
As of this moment, I don’t believe that the mere change of leadership is enough to justify the growth seen in Intel’s stock over the last week unless the company announces a product with some fundamental change in direction. What they would need isn’t necessarily something that would be able to compete with AMD but the rapid rise of ARM processors traditionally found in phones and are inbound for widespread computer adoption.
