Chip War by Chris Miller

Author:Chris Miller
Language: eng
Format: epub
Publisher: Scribner
Published: 2022-10-04T00:00:00+00:00

CHAPTER 41 How Intel Forgot Innovation

At least the United States could count on Intel. The company had an unparalleled position in the semiconductor industry. The old leadership was long gone—Andy Grove died in 2016, while Gordon Moore, now in his nineties, retired to Hawaii—but the reputation of having commercialized the DRAM and invented the microprocessor remained. No company had a better track record combining innovative chip design with manufacturing prowess. Intel’s x86 architecture remained the industry standard for PCs and data centers. The PC market was stagnant, because it seemed nearly everyone already had a PC, but it remained remarkably profitable for Intel, providing billions of dollars a year that could be reinvested into R&D. The company spent over $10 billion a year on R&D throughout the 2010s, four times as much as TSMC and three times more than the entire budget of DARPA. Only a couple of companies in the world spent more.

As the chip industry entered the EUV era, Intel looked poised to dominate. The company had been crucial to EUV’s emergence, thanks to Andy Grove’s initial $200 million bet on the technology in the early 1990s. Now, after billions of dollars of investment—a substantial portion of which had come from Intel—ASML had finally made the technology a reality. Yet rather than capitalizing on this new era of shrinking transistors, Intel squandered its lead, missing major shifts in semiconductor architecture needed for artificial intelligence, then bungling its manufacturing processes and failing to keep up with Moore’s Law.

Intel remains enormously profitable today. It’s still America’s biggest and most advanced chipmaker. However, its future is more in doubt than at any point since Grove’s decision in the 1980s to abandon memory and bet everything on microprocessors. It still has a shot at regaining its leadership position over the next half decade, but it could just as easily end up defunct. What’s at stake isn’t simply one company, but the future of America’s chip fabrication industry. Without Intel, there won’t be a single U.S. company—or a single facility outside of Taiwan or South Korea—capable of manufacturing cutting-edge processors.

Intel entered the 2010s as an outlier in Silicon Valley. Most of America’s biggest firms in the market for logic chips, including Intel’s archrival AMD, had sold their fabs and focused only on design. Intel stuck stubbornly to its integrated model—combining semiconductor design and manufacturing in one company—which executives there thought was still the best way to churn out chips. The company’s design and manufacturing processes were optimized for each other, Intel’s leaders argued. TSMC, by contrast, had no choice but to adopt generic manufacturing processes that could work just as well for a Qualcomm smartphone processor as an AMD server chip.

Intel was right to perceive some benefits of an integrated model, but there were substantial downsides. Because TSMC manufactures chips for many different companies, it now fabricates nearly three times as many silicon wafers per year as Intel, so it has more chance to hone its process. Moreover, where Intel saw chip design startups as a threat, TSMC saw potential customers for manufacturing services.

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