Intel chief says further consolidation needed in chip industry

The CEO of Intel said further consolidation was needed in the chipmaking industry, days after a report that the US chipmaker was in talks to buy GlobalFoundries for $ 30 billion.

“We just don’t think the smaller players will be able to keep up,” said Pat Gelsinger. Speaking on a call with analysts to discuss Intel’s latest earnings, he added that “foundries without peak capabilities” – a term commonly used to refer to those that do not make computer chips with the most small feature sizes – would struggle to compete.

GlobalFoundries, which is owned by Mubadala, an Abu Dhabi sovereign wealth fund, discontinued advanced manufacturing three years ago. At the time, it abandoned its plan to make 7-nanometer chips – the same process technology Intel struggled with.

Gelsinger’s comments are the clearest indication yet that the US chipmaker could use negotiation to strengthen its manufacturing base. Intel said it was in discussions with 100 potential customers for the new foundry business it announced in March, justifying a rapid expansion of its production facilities.

“We wouldn’t say mergers and acquisitions are essential, but neither will we rule out,” the CEO of Intel said on Wall Street. Mubadala did not comment on discussions with Intel, which were reported by the Wall Street Journal, while GlobalFoundries said he was not in discussions.

Meanwhile, Intel said it expected the supply chain crisis rocking the electronics world to come to a head this summer, and predicted it could take another two years to pressure in the industry to ease completely and customer supplies to return to normal.

Supply pressures – especially the lack of silicon wafers from which Intel carves its chips – would hold back personal computer semiconductor production in the current quarter, weighing on sales, the company said.

The caution, along with the higher costs the company said it faced later this year as it finally tried to ramp up production of 7nm chips, wiped out 2% of its trading shares after -sale.

Some industry leaders have predicted a faster rebound in chip supplies, arguing that shortages have been artificially exacerbated by excessive customer orders in an attempt to offset shortages. But Gelsinger has warned for months that the problems will hamper electronics makers much longer than many realize, repeating on Thursday that it would take “a year or two for the industry to catch up with demand.”

The warning came as Intel reported surprisingly strong second-quarter earnings, thanks to the continued rebound in PC sales that started with the Covid-19 lockdowns. Revenues of $ 19.6 billion exceeded Wall Street expectations by nearly $ 2 billion – although sales were still slightly weaker than a year ago, when an increase in digital demand caused by the pandemic has resulted in increased chip sales to cloud companies.

Intel raised its full-year revenue forecast by $ 1 billion, to $ 73.5 billion, although after last quarter’s $ 2 billion outperformance, that still implied a deficit of $ 1 billion for the rest of the year.

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