How can intel improve its margin?? is it only possible by reducing headcounts till 2024... whats your take?
Not sure Ayush. Good Question though. Let's explore together....
With Revenue flat to down and ASP's dropping the only path forward is to improve yields and other components of COGS - More energy savings, which they are good at, drop consumables costs, Raw Silicon costs. Capital depreciation is 70 to 80% of COGS and this is a fixed cost.
Labor Savings, but that's less than 8% of Cost of Goods sold. They've furloughed technicians and operators until they see an uptick in demand. Which according to Intel's internal capacity forecast will be slightly down in 2024.
Collectively the industry is ramping fab capacity by 3x the aggregate incremental demand in 2025. So only TSMC will be able to have good margins in Sub 5nm and below. All the lower density devices will be a commodity market with excess supply and dropping ASP's. Companies like NXP, Tower, and TI have a largely captive audience for their lower density devices and should have steady, relatively small profits through 2025.
Intel is running out of levers to pull, and exempt headcount will be cut at least by 20% by Q4 2024. Hopefully they won't brand layed off workers as thieves to prevent their return when and if a recovery comes.
Currently, they are quietly cutting headcount; I am hearing weekly from 3 to 4 workers that they've been given a slimmed down exit package to go away. In order to get the much needed funds they have to sign to a secrecy agreement to not disparage the company for its poor HR and other wokester admin practices.... Its become a "get while the getting is good" scenario. For the most part, the people with marketable skills, have taken better buyout package and have already left.
They are having to sell inferior products in the AI market near cost to try and compete with the Nvidia H100 and H200 products that have 90% product margins.
An Intel device su-ks 13X more power for the same workload as AMD and Nvidia's offerings. Power is 80% of the variable cost for a modern AI data center. An Intel configured data center consumes 4x the square footage of an AMD or Nvidia DC.
Intel PR and marketing departments, only tout improvement from previous GPU/CPU offerings. They never compare themselves to industry competitors because they are foundering and are a lap down in a 10,000 meter race with two laps to go....
The only hope for Intel will be to catch a green light 14 times in a row. There's no room left for any contingency in their 7, 3, 2 and 1.8 nm development and yield improvement plans. So far they've had to blow through 4 red lights to dubiously get on track. - "They redefined the program milestones in order to give the executives "a sense of all is well - Nothing to see hear...."" This has been an ongoing issue at Ronler Acres for over a decade....
The fundamental issue is - "the FinFet transistor design is marginally manufacturable even with the most precise and accurate High NA exposure tool." In 2025 Intel will be purchasing a $300M state of the art tool in an attempt to mitigate the issues which have them at an 530 Iso defect index. TSMC is roughly at 640 ISO and have solid plans to get to 680. The difference in good die/wafer is approximately 3x better depending on die size. Intel 4 has a transistor density half of TSMC's "comparable" 5nm device - 110Mtransistors/mmsqared vs. 215mts/square mm.
The relationship with ASML has been strained to a breaking point in Hillsboro and Chandler. Some ASML folks are undermining Intels programs, because of the abuses in the present and the past. ASML is having retention issues at both sites as a consequence.
There are somewhat covert plans to have Bill Ackman take another run at taking Intel private and bring Jim Keller back as CTO and to install a new CEO. VC's on Sand Hill Rd, Palo Alto and BlackRock are considering throwing in. The buzz is they'll wait until 2024 when Intel's destiny is better understood by the public.
The industry sharks are smelling blood in the water and and are lining up to further undercut Intel's competitive position...
NVIDIA and TSMC have largely poached the 10% of the workers who create 90% of the results. The HR and Admin ranks, out number the front line engineers by a factor of 1.8 to 1. NVIDIA, AMD, and TSMC have a ratio ranging from 0.4 to 0.6 to 1.
Theirs a growing realization that Intel 's corrupt HR and Admin practices have created chaos and confusion in its workforce and no one is willing to tell The King/Queens and their court The last two court jesters have been summarily shot. Some suspect "At the next full board meeting, their will be a circular firing squad breaking out inside RNB 1 in Santa Clara." There's a movement to create an engineers union at Ronler Acres.