Intel may look to outrun foundry competitors with new CEO Krzanich

Intel could move in the direction of becoming a full-fledged foundry, but will not make products for competitors

By , IDG News Service |  IT Management

Intel hasn't signaled a change in strategy with the appointment of Brian Krzanich to CEO, but it is likely that the company will take steps to outrun its foundry competition by opening its industry-leading manufacturing facilities to more third parties.

Krzanich replaces Paul Otellini, who will retire this month after 40 years with the company, including eight years as CEO. With knowledge of Intel's complex manufacturing and chip operations, Krzanich became the top candidate to take over from Otellini.

The appointment of Krzanich points to a possible directional change for Intel to take on a larger foundry model and make more chips for third-party companies. Krzanich previously managed Intel's manufacturing operations, and analysts agreed that his appointment sends a message the company wants to use its strong manufacturing assets to generate revenue and keep factories occupied.

Intel has historically used its manufacturing assets to make chips for itself, but recently warmed to the idea of becoming a contract manufacturer. Intel has signed contracts to make chips -- mainly the high-margin FPGAs -- on a limited basis for third parties such as Altera, Tabula and Achronix. Intel's manufacturing assets are considered a generation ahead to rivals such as TSMC (Taiwan Semiconductor Manufacturing Co.) and GlobalFoundries, which are top two contract manufacturers.

"Intel will lead with massive manufacturing and fab technologies to attempt to outrun their competition. Additionally, Intel will likely ramp their foundry business and turn it from a hobby into a billion dollar business," said Patrick Moorhead , president and principal analyst at Moor Insights and Strategy, in an email.

There's no change in the company's strategy as of now, though things may change with manufacturing in the future, said Chuck Mulloy , an Intel spokesman. Manufacturing is a core asset for Intel, Mulloy said, adding that Intel's Technology Manufacturing Group has 50,000 employees, including 4,000 Ph.Ds. That is roughly half the employee count.

Intel puts a lot of research into underlying science and physics in the field, and will continue to take advantage of its manufacturing resources, Mulloy said.

"We're not going to walk away from that," he said.

Intel is the world's largest chip manufacturer and has invested billions of dollars in building new factories. It will be the first to move to the 14-nanometer process later this year. The nanometer process refers to the underlying physics used in factories to create substrates on which chip features are etched. Intel was the first to stack transistors on top of each other -- also called FinFET or 3D transistors -- in 2011, while rivals such as TSMC and GlobalFoundries are expected to catch up only next year.

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