Will Intel go bankrupt?

Suggest you read my post of “How bad is Intel right now?” before you go throuth this post.

Table of Contents

Impossible to go bankrupt

Let me start with the conclusion: Professionally speaking, it is impossible for Intel to go bankrupt. The reason is because of the existence of Microsoft. As long as Microsoft’s Windows exists, Intel cannot go bankrupt. Because Windows has optimized many platforms for Intel in the past fifty years, there are thousands of various software on Windows. As long as there is work, Microsoft will continue to make a lot of money.

It is true that Windows can now run on non-Intel or non-Supermicro non-x86 instruction set hardware platforms (such as Qualcomm or Apple), but the performance is very poor, software compatibility is even worse. It can be used for demo and showoff purpose only, but no one will use it to work for business daily operation. Such a solution existed more than ten years ago, but now only a few people use it. Why?

Those who say Intel will go bankrupt immediately or within a few years like Nokia are simply unfounded and ignorant. A computer is not a mobile phone. If a mobile phone is lost after two years of use, no one cares about the software or hardware platform. But buying a computer is for work. The complexity and usage scenarios of computers are completely different.

However, this does not mean that Intel can come back to life and return to the prosperity of 20 years ago. These two are different things.

Share collapse zero, impossible!

Intel’s stock price may slowly fall before the transformation is successful, until Intel convinces the market and investors that it has gotten back on its feet.

However, one thing is certain, its stock price is unlikely to collapse. or delisted.

When I mention Intel in my books and blog, I have repeatedly emphasized the following two points:

Intel is extremely important to the United States, and it is impossible for the U.S. government to let this company fail.
Intel’s past life and company culture have been too comfortable and must be completely changed to succeed. The company’s problem lies in culture and mentality, not technology (if you have been brainwashed into thinking that Intel’s technology is significantly lagging behind, you’d better re-examine your view).

Declarations alone are useless, because the same drama has been played out countless times and it has become boring. Investors have very low confidence in Intel right now. Only by actually doing it and showing actions and achievements can investors’ confidence be restored.

When will the dead come back to life?

After all, twenty years have passed since the comfortable days. If you want to reverse the situation in a short period of time and achieve immediate results, people who have this kind of idea can be said to be wishful thinking. They also do not have a deep understanding of this company because they are used to living a comfortable life. In a company where the boss has been the boss for decades, it is impossible to admit that he is the younger brother. How can he bow to reality?

Rely solely on subsidy can’t go too far

Intel has become the main beneficiary of the US CHIPS Act, receiving US$8.5 billion in grants and US$11 billion in loans from the US government. This is very powerful news and could allow the company to regain its competitive advantage.

But after Gelsinger came to power, he went around asking for subsidies from governments of various countries and building wafer farms everywhere, instead of relying on his own financial capabilities or achievements. This approach is not the right way, and sooner or later countries will get tired of it.

Unwise to bet company future on IFS

It is unwise to bet the future on foundry. The current direction of Intel seems to be to bet the future on foundry, trying to convince investors and the world that it will rise again and sooner or later defeat TSMC and Samsung.

However, it is unrealistic to regard TSMC and Samsung as rivals, because Intel’s current foundry strength is not on the same level as the two, and it is unlikely that it will catch up within ten years. Please note that although foundry is currently Intel’s second-largest revenue segment, it is suffering serious losses. In short, wafer foundry is not just about catching up in process technology.

Intel must admit as soon as possible that its advantage does not lie in wafer foundry. It is unwise to bet the company’s future on wafer foundry capabilities because it is difficult to make progress.

Tan’s resignation from the board of directors

Lip-Bu Tan has been the CEO of Cadence (ticker: CDNS), one of the world’s three largest semiconductor EDA suppliers, since 2009.

On August 23, 2024, Intel announced in a document submitted to regulatory agencies that Lip-Bu Tan announced his resignation from the board of directors and joined Intel’s board of directors two years ago as part of a plan to restore Intel’s position as the world’s leading chip manufacturer. The board of directors expanded Lip-Bu Tan’s responsibilities in October 2023, authorizing him to oversee manufacturing operations.

On August 27, 2024, according to Reuters citing three people familiar with the matter, Lip-Bu Tan suddenly announced his resignation from the board of directors due to issues such as redundancy, risk-averse culture, and lagging artificial intelligence strategy between him, CEO Pat Gelsinger, and other directors at Intel.

Lip-Bu Tan is a well-respected veteran in the semiconductor industry. His departure shows that Intel’s efforts to turn losses into profits and transform the company still have great uncertainty.

Lip-Bu Tan’s resignation from the board of directors proves that my point of view on Intel is absolutely correct.

Conclusion

Intel is a company with a moat and competitiveness, and an ecosystem. Competitive advantages including talent, technology (Again: If you have been brainwashed into thinking that Intel technology is significantly lagging behind, you’d better re-examine your views), patents, duopoly, switching costs, etc. are difficult (not impossible) to break.

As I have repeatedly emphasized in my book and this blog, Intel’s problem is corporate culture, not technology (Please see the previous paragraph for the reasons why Lip-Bu Tan resigned from the board of directors). If the corporate culture that has been too comfortable in the past sixty years does not change, and the mentality of the superior boss does not change, everything will be in vain.

Investors who are optimistic about Intel need to have extraordinary patience, otherwise you should stay away from this company, because it will only let you down again and again before it is possible to come back to life.

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