✨ Value Investing Substack NEWS - INDUSTRY PRIMER: INTEL
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The fact that Intel made a big deal about the switch from copper to cobalt in the move from 14nm to 10nm, only to turn and head back to enhanced copper with Intel 4 (original 7nm) points to problems with cobalt at the manufacturing level. Cobalt has much higher resistance than copper and this could partly explain the low frequencies Intel initially offered with Cannon Lake and Ice Lake. The company was clearly able to improve the problem in later 10nm / Intel 7 hardware, because Tiger Lake and Alder Lake have both hit higher clocks than Ice Lake, but Intel still isn’t sticking with its previous approach as it shrinks the node.
According to Intel, the number of masks it needed to use per CPU would have jumped 30 percent from Intel 7 to Intel 4 without EUV. Instead, the number of masks required for Intel 4 dropped by 20 percent. Total process steps decreased by five percent. Like TSMC, Intel’s initial adoption of EUV will be limited. The company is reportedly using EUV for contacts, but only certain metal layers and vias. TSMC and Samsung both use EUV for contacts, vias, and metal layers. Intel is expected to widen its adoption of EUV with Intel 3, so this gap will narrow over time. RWT notes that Intel is still using SAQP (aka quad patterning) for certain metal layers, which implies the older technology is still more economical or effective than EUV in certain circumstances.
Introducing EUV is a big step for every manufacturer. Intel is choosing to move more cautiously with the technology. In this, it’s echoing something more like TSMC’s path to EUV than Samsung’s. TSMC introduced EUV in limited capacity at 7nm and then improved its 5nm usage. Samsung, in contrast, went all-in on EUV from 7nm forward. Samsung, however, has also been struggling with yield problems for years now. Yields on its 3nm GAA (Gate-all-around) process were reportedly in the 10-20 percent range earlier this year, while its 4nm process is only yielding at 35 percent. Yields on early nodes are always poor initially, but these numbers are going to drag on Samsung’s efforts to win customers for its leading-edge manufacturing.
By treating Intel 4 as the foundation Intel 3 will build on, Intel splits its EUV transition across two nodes and simplifies its own learning curve. EUV and Intel 4 will ramp at Intel’s Hillsboro fab first before being duplicated at Leixlip. Ramping production in a second fab presents its own challenges — this is why Intel uses its “Copy Exactly” formula for fab design — but Intel will be its own customer for these parts during the initial build-out. It should be easier to move from Intel 4 to Intel 3 than to jump straight from Intel 7 (non-EUV) to Intel 3 (EUV) with no step in the middle.
I talk a lot about how foundry manufacturing is a long game, and Intel’s 10nm saga and potential recovery show that trend well. When Intel introduced 22nm, it beat the rest of the world to FinFETs by several years. It took Intel years to fix its 10nm process, but the company was able to resolve its problems well enough to eventually transition its high performance microprocessors over to the node. Instead of trying to duplicate its “Everything + Kitchen Sink” approach to 10nm, Intel will split the improvements and focus on high performance parts first, with high density libraries, more EUV integration, and support for a broader range of customers all arriving with Intel 3.
Intel’s problems at 10nm are easily the biggest “miss” the company has suffered in decades, but Intel was never in any financial danger from its 14nm hangover. I wouldn’t bet against Intel competing again for leadership in semiconductor manufacturing for the same reason I wouldn’t have bet against Intel 17 years ago, when the Athlon 64 X2 was an ascending star and Intel’s dual-core Pentium D CPUs were sucking wind. Intel’s dual-core Pentium D CPUs (codenamed Smithfield) would eventually have a bit of revenge on the rest of the market as late-game star overclockers, but while Prescott-derived cores made the company a lot of money, they did nothing for its reputation. Speculation that AMD would bankrupt Intel reached a fever pitch among enthusiasts from 2004 – early 2006. Then Intel launched the Core 2 Duo “Conroe,” and spent the next 11 years as the unchallenged king of high-end x86 performance.
Hitting Intel is a lot like hitting a rubber wall with a hammer. Denting it is easy. Inflicting meaningful, long-term damage? That’s tougher, especially if the “damage” amounts to little more than “Making modestly less net profit on an annual basis.” It’s much too early to predict whether Intel will succeed in retaking the semiconductor performance throne, but the company has laid out a plausible path to get itself there by emphasizing its historic engineering and leadership role in the industry. TSMC shouldn’t be quaking in its boots, but it shouldn’t be ignoring the long-term threat, either.
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> Let’s first get oil out of the way. The primary thing people focus on when discussing inflation. Since it was a major contributor to inflation in the 1970s. And demand is pretty inelastic. Nominal oil prices went up more than 10x from 1970 to 1980. Adjusted for inflation, they went up about 5x (source)
Oil as a % of GDP went up from about 2% in the late 60’s to as high as 11-12% in 1980. Not hard to see how that can create double digit inflation.
Currently at $110/barrel, we are at 4% of GDP. With demand being less inelastic today as working from home, going electric and using Zoom is much more of an option than in the 1970’s. And we are still below the highs of 2010-2013.
> So my overall feeling is that these inflation fears are very overstated. And that things will normalize in 2023-24. The market is generally not a good predictor here. It panicked about crashing oil prices in 2016, about Trump, then changed its mind quickly. It panicked about Brexit, about the trade war, about Covid. In hindsight these were all great buying opportunities if you just looked at the numbers, instead of buying into narratives.
LINKS
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Macro
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America:
Eurozone:
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News & Other:
Megathread: Roe v Wade overturned by the US Supreme Court [Reddit]
Unpaid social media moderators perform labor worth at least $3.4 million a year on Reddit alone