Invest in Pakistan Summit: Can Pakistan Benefit From US-China Tech War?

About 200 Pakistani-American and other American investors met at Invest in Pakistan Summit in Silicon Valley on October 3, 2019 at San Jose Sheraton. It was hosted by the Pakistan Embassy in Washington DC. One of the sessions I found interesting dealt with the opportunities presented to Pakistan by US-China technology war sparked by US President Trump's actions against Chinese technology giants Huawei and ZTE.  In response to the US threat to restrict access to American core technology, China is aiming to develop and produce 40% of the semiconductors it uses by 2020 and 70% by 2025, according to Washington-based CSIS report. It is estimated that China needs about 500,000 engineers to achieve this goal. Can Pakistan, a reliable Chinese ally, train and provide some of these engineers?

US-China Tech War:

The technology war between the United States and China has been going on with the roll-out of the 5G next generation broadband wireless technology.  China has developed its 5G technology in an attempt to become independent of the technology developed and controlled by companies in the United States and other western nations.  US has been actively trying to stop adoption of Chinese company Huawei's 5G technology in Europe, East Asia, Australia and New Zealand. So far, the US has had limited success while China's Huawei is continuing to win customers around the world.

Tech Supply Chain Bifurcation:

President Trump has also attempted to block Chinese companies' access to semiconductor components and software developed and sold by US companies. Both Huawei and ZTE have been riding a roller coaster with President Trump's daily tweets on this issue. It has affected reliable access to communication chips, Android operating systems and Google apps store.

The net result of it is that the Chinese have lost faith in US companies' reliability. They are now seeking to to create their own supply chain free of companies from US and its close allies in Europe, East Asia and elsewhere.

China's Plans:

China is currently a net importer of technology. The country wants to move “up the value chain” from final product assembly using imported components to creating advanced technology in China itself, but imports of chips and technology will be the norm for many years to come, according to a report by James Lewis of Center for Strategic and International Studies (CSIS) based in Washington DC.

As of now, only 16% of the semiconductors used in China are produced domestically, and only half of these are made by Chinese firms. It is dependent on foreign suppliers for advanced chips. China aims to produce 40% of the semiconductors it uses by 2020 and 70% by 2025, according to the CSIS report.

Opportunity For Pakistan:

China will need 500,000 engineers trained in chip development over the next 5 years to meet its goal of producing 70% of semiconductors within the country, according to Pakistani-American entrepreneur Dr. Naveed Sherwani who presented at the Invest in Pakistan Summit in Silicon Valley.

Naveed and his wife Sabahat Rafiq see this as an opportunity to train a significant number Pakistani engineers in semiconductor chip development to meet China's needs. This will help develop Pakistan's tech-oriented human capital and open up the possibility for Pakistan to build its own chip design and development industry.

Sabahat said she is already training some engineers at an institute in Lahore for this purpose.  She is hoping to expand it to accommodate more trainees in near future.

Naveed currently heads SiFive, a Silicon Valley startup specializing in RISC V microprocessor cores for customized systems on chip (SoC) development.  RISC V is an open source chip architecture developed at UC Berkeley. It is the hardware equivalent of open source Linux OS software.  Naveed is promoting SiFive in both China and Pakistan for "low-power embedded microcontrollers (as small as 13.5k gates) to multi-core applications processors".

Cloud Design:

Naveed talked about the availability of cloud-based advanced chip design tools that Pakistani chip designers can take advantage of. Among the top vendors offering such tools is  Amazon Web Services (AWS).

AWS says it "offers a secure, agile, and scalable platform with a comprehensive set of services and solutions for high performance design, verification, and smart manufacturing, supporting electronic design automation (EDA) and rapid semiconductor innovation in the cloud. Semiconductor companies, including fabless and integrated device manufacturers, and their IP and foundry partners can benefit from the massive scale of AWS infrastructure to design next gen connected products".

Here's how AWS describes its cloud-based chip design tools offering:

"Semiconductor design simulation, verification, lithography, metrology, yield analysis, and many other workloads benefit from the scalability and performance of the AWS Cloud. For example, compute performance for these applications is enhanced by latest generation EC2 instance types, including the z1d. Run more jobs per core with z1d, the fastest single thread performance of any cloud instance delivering 4GHz sustained CPU, 16 GiB RAM per core, and local NVMe storage. Our virtually unlimited cloud storage and high performance computing (HPC) capability enable you to innovate faster, rapidly design and verify new products, and scale seamlessly to meet increasing demand".

Summary:

US-China technology war has recently been triggered by US President Trump's actions against Chinese technology giants Huawei and ZTE.  In response to the US threat to restrict access to American core technology, China is aiming to develop and produce 40% of the semiconductors it uses by 2020 and 70% by 2025, according to the CSIS report. China needs about 500,000 engineers to achieve this goal. Can Pakistan, a reliable ally, train and provide some of these engineers? Pakistani-American entrepreneur Dr. Naveed Sherwani and his wife Sabahat Rafiq believe the answer is an emphatic Yes. This will help develop Pakistan's tech-oriented human capital and open up the possibility for Pakistan to build its own chip design and development industry.

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Views: 504

Comment by Riaz Haq on December 7, 2019 at 7:58pm

#Pakistan’s central bank chief wants to boost #exports via cheap credit to help end a chronic boom-and-bust cycle. Says “Countries that have sustainably raised their living standards, emerging markets particularly, have relied on exports,” #economy #IMF https://www.bloomberg.com/news/articles/2019-12-05/ending-pakistan-...


Pakistan’s central bank wants to boost exports to help end a chronic boom-and-bust cycle now that the economy is showing signs of stability.


In an interview in Karachi, Governor Reza Baqir said he’s encouraged by early indications of an improvement in the economy and authorities want to ensure they can keep the growth momentum going by adopting export-focused strategies.

The State Bank of Pakistan is considering giving cheap credit to new industries with export potential and wants commercial lenders to boost their share of loans to small and medium enterprises by more than double to 17% of total private sector credit by 2023, officials said. The markup on loans to exporters is less than half of the regular loans, which are currently priced at more than 13%.

“Countries that have sustainably raised their living standards, emerging markets particularly, have relied on exports,” Baqir said on Wednesday from his office in Karachi. “In our view, a very key shift that has to occur in our thinking is to shift ourselves from being an inward-oriented economy to an outward-oriented economy.”

Pakistan holds rate for two meetings after rate doubles
After 18 years in various roles at the International Monetary Fund, Baqir was brought in to the central bank in May to help stabilize an economy weighed down by high debt, low foreign currency reserves and weak growth. Pakistan was forced to turn to the IMF for a bailout again this year, its 13th since the late 1980s, with the central bank raising interest rates and freeing up the currency, and the government required to boost revenue to meet conditions of the loans.

“The measures that are in this program are all measures that we think are going to lay the foundations for sustainable growth and to end the boom-and-bust cycles that have historically plagued us,” said Baqir. “The start is encouraging, it’s very good but we have to keep our eye on the goal post.”

The economy has posted early successes so far. The fiscal deficit dropped by half to 0.7% of gross domestic product in the three months through September compared with the same period last year, according to government data. The current account turned into a surplus for the first time in four years in October.

Investors are following suit. Foreigners invested about $1.2 billion into Pakistan Treasury bills since July after virtually zero inflows in the past two years. Moody’s Investors Service raised Pakistan’s credit rating outlook to stable from negative this week.

Read: From Zero to Hero: Pakistan Bonds Evoke Egypt’s Success Tale

“People sometimes take things for granted but you know, all we need to do is to look back four, five months and the sentiment was very different,” said Baqir. “The fact that the sentiment has turned around is, for us, an important part of the stabilization.”


The economy has fallen into a pattern of fast growth followed by a slump in recent years. Pakistan is reliant on capital imports, so rapid growth pushes up demand for overseas goods. That’s what happened about two years ago, with imports rising to a record to exceed exports by three times. The current-account deficit came under pressure and foreign reserves dwindled, prompting the central bank to devalue the currency by almost half and double interest rates to 13.25%.

Baqir said there’s room for optimism that “the turnaround in the real economy may also be coming close.” Looking at government “expenditure on development projects, we have something that is quite striking,” he said.

Activity Starter
Pakistan government doubles release for public development spending

Comment by Riaz Haq on January 3, 2020 at 4:01pm

Terra Nova Capital Partners--#European #Investor in #Pakistan #IT company: "...they hire the best IT talent locally, 80% of their revenue comes from overseas thanks to strong client relationships in North America, Germany and the Middle East". #technology https://www.terranovaca.com/a-month-in-pakistan

On the ground, we found most companies in a depressed state due to currency devaluation and struggling domestic economy. However, the exporters are poised to benefit from the devalued rupee, while import substitute businesses take advantage of government policies such as tax subsidies designed to reduce the problematic current account deficit. As a result, we invested in four companies which we believe will do well even in this turbulent time for the economy: three export-related businesses (an IT company, a textile manufacturer, and a hydrogen peroxide producer that supplies textile industry) and a fertilizer business benefiting from import substitution policies.


The IT services company we invested in is a hidden gem that shines from all angles. First, the business stands to benefit from the weak currency: while they hire the best IT talent locally, 80% of their revenue comes from overseas thanks to strong client relationships in North America, Germany and the Middle East. Second, they have grown earnings for many quarters and expect further 15% bottom-line expansion next year. And third, they have built an open-minded, friendly culture: we were impressed that the company’s CFO is female (having women in top positions is rare in Pakistan), there is a gym at the office (with female-only hours), and the employees collaborate, look happy, and smile. This progressive and growing business was trading at only 7x P/E, a bargain compared to its historical levels of around 20x and IT outsourcers in other markets trading at over 30x.

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After many unsuccessful attempts to get a meeting with Pakistan’s finance minister, we decided to simply show up at his office. Getting through security was surprisingly easy, but as we were about to waltz into the minister’s office, a large man summoned us.



The large man was the “Additional Finance Secretary”. We explained that we have been active foreign investors in Pakistan for six years, and had sent five unanswered emails to the minister over the past four weeks requesting a meeting. The man assured us that every email gets printed and placed on his desk so he personally saw every message we sent (though he did not recall seeing any of them). Instead of minister@finance.gov.pk, he said we should send our request to the Yahoo! email address on his official business card (?!) and he would get back to us in a few weeks. As it was apparent he was just trying to get rid of us, we persisted. He finally told us that if we follow him he would take us to shake the minister’s hand and make the appointment.



However, as we were passing by the minister’s door we realized that the man had no intention to stop. Instead, he said he was escorting us out of the building. In a last-ditch effort, we knocked on the door and were about to open it – only to be dragged away by the large man. We later learned that finance minister takes 2-hour afternoon naps in his office, so we hope we didn’t wake him up.

Comment by Riaz Haq on April 29, 2020 at 10:29pm

“Because technology is the key weapon in the fight for control of the industries of the future and in combating pandemics, the US private tech sector will become increasingly integrated into the national-security-industrial complex.”

https://www.theguardian.com/business/2020/apr/29/ten-reasons-why-gr...

Comment by Riaz Haq on May 1, 2020 at 9:46pm

China’s Digital Silk Road after the Coronavirus
April 13, 2020

The COVID-19 pandemic will be a history-altering event. But where will it take us? In “On the Horizon,” a new CSIS series, our scholars offer their insights into the fundamental changes we might anticipate for our future social and economic world.


https://www.csis.org/analysis/chinas-digital-silk-road-after-corona...

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Just a few months ago, China’s technology ambitions appeared imperiled by Covid-19, then raging through the center of the country, bringing its economy to a standstill, and wreaking havoc to global supply chains. But the pandemic is already providing new opportunities for China’s rise as a technology power and global provider of digital infrastructure. Indeed, in the months and years ahead, China’s Digital Silk Road will only accelerate and expand.

Consider the China-Pakistan Economic Corridor (CPEC), which Chinese officials have touted as the BRI’s flagship. Since CPEC was announced five years ago, over 60 percent of its projects have been transportation and energy, and many have been bogged down with delays. While proposed pipeline and railway connections between China and Pakistan remain pipedreams, Huawei was able to lay a fiber-optic cable across their border and deep into Pakistan in under two years. Stretching 820 kilometers, the project cost just $44 million—less than it costs to build only four kilometers of railway in Pakistan. Given Pakistan’s mounting debt, the second phase of CPEC, much like the future of the BRI, will place a greater emphasis on smaller, higher-tech projects.

The less visible nature of digital infrastructure also fits more easily into the geopolitical environment that Chinese firms will face as the Covid-19 crisis abates. Prior to the crisis, China’s approach to delivering large projects in foreign countries, which relies heavily on its own companies and workers, stoked resentment among local communities. In recent years, Chinese workers have been attacked in Bangladesh, Kazakhstan, and Kenya, among other stops along the BRI. Given the source of the outbreak, Chinese workers are more likely to face discrimination abroad. Digital infrastructure projects are typically less visible, and less disruptive, to local communities than large transport and energy projects.

Chinese tech companies also see an opening to pitch their products as part of responding to the current outbreak and preventing future pandemics. Hikvision, Dahua, and other leading surveillance companies have introduced thermal imaging systems to detect fevers. Alipay and Tencent have developed health apps that generate QR codes indicating a user’s health status. Naturally, these companies are looking to sell these products overseas. Alibaba is already offering its cloud services to model regional outbreaks and connect health professionals. These offerings are not unique to Chinese companies, but they often come with fewer privacy protections than their Western counterparts.

Comment by Riaz Haq on June 2, 2020 at 4:34pm

China’s largest chipmaker to raise $2.8 billion in listing to boost capabilities amid #trade war. SMIC is part of #China’s push for self-reliance in #semiconductors, a field in which the world’s second-largest economy is seen as far behind #UnitedStates. https://www.cnbc.com/2020/06/02/china-chipmaker-smic-to-raise-2poin...|twitter&par=sharebar

China’s largest contract chipmaker, Semiconductor Manufacturing International Corporation (SMIC), has filed for a listing in Shanghai that will raise 20 billion yuan ($2.8 billion).
The move comes as the company looks to bolster investment in its technology amid the escalating trade tensions between the U.S. and China, which could force SMIC to take on more production.
SMIC is part of China’s broader push for self-reliance when it comes to semiconductors, a field in which the world’s second-largest economy is seen as far behind the U.S.

China’s largest contract chipmaker, Semiconductor Manufacturing International Corporation (SMIC), has filed for a listing in Shanghai that will raise 20 billion yuan ($2.8 billion).

The move comes as the company looks to bolster investment in its technology amid the escalating trade tensions between the U.S. and China, which could force SMIC to take on more production.

SMIC, which is already listed in Hong Kong, has been looking to raise cash to do that. It got a $2.2 billion investment from state investors last month.

The company is part of China’s broader push for self-reliance when it comes to semiconductors, a field in which the world’s second-largest economy is seen as far behind the U.S. But China’s efforts have been given greater impetus as Washington continues its technology war with Beijing.

Huawei has been one of China’s companies targeted by U.S. sanctions. Last year, it was put on a U.S. blacklist called the Entity List which restricted its access to American technology. In May, the Trump administration introduced a rule which requires foreign manufacturers using U.S. chipmaking equipment to get a license before being able to sell semiconductors to Huawei.

That rule is likely to affect Taiwan’s TSMC, which makes most of the chips Huawei designs for devices such as smartphones. If Huawei cannot get hold of semiconductors from TSMC, it may have to look for alternatives such as SMIC. But experts have previously told CNBC that SMIC’s technology is far behind TSMC.

The recent cash injection, therefore, could be a boost for the company as it looks to rapidly expand its capabilities.

In its listing prospectus, SMIC said that the U.S.-China trade frictions and Washington’s latest rules on semiconductors could be headwinds for the company.

Comment by Riaz Haq on June 12, 2020 at 9:34am

#US Congress Push to Invest Billions in #Semiconductor Industry to Counter #China. The future of the #computer #communications #chip industry is particularly significant because it is a foundational #technology that can give nations an edge in innovation https://www.nytimes.com/2020/06/11/business/economy/semiconductors-...

China’s technological ambitions are eliciting rare bipartisan agreement in Washington, with lawmakers considering investing tens of billions of dollars in America’s semiconductor industry over the next five to 10 years to help the United States retain an edge over Beijing.

A bipartisan measure introduced this week is one of several proposals that would provide substantial funding for the semiconductor industry, which manufactures chips that serve as the tiny brains or memory of electronic devices from smartphones to fitness trackers.

The efforts reflect a shifting consensus in Washington, as lawmakers look to more expansive government intervention in private markets to help American firms compete. That includes Republicans, who have long criticized government-led industrial plans as inefficient and redolent of communism but have watched with dismay as such efforts in China have allowed it to dominate industries from steel and solar panels to shipbuilding.

The future of the semiconductor industry is viewed as particularly significant because it is a foundational technology that can give nations an edge in innovation. China has been shoveling billions into developing its own chip industry, which has long been dominated by the United States and has helped propel a boom in 5G technology, artificial intelligence and robotics.

Semiconductors are still one of America’s largest exports, and American companies that design and sell chips still account for nearly half of global revenue in the sector, the greatest share of any country. But the United States only accounts for around 12 percent of global semiconductor production capacity. Decades ago, domestic designers began turning to foundries in places like Taiwan and South Korea to manufacture their chips.

While past government subsidies have largely focused on chip research, the latest bill puts a heavy emphasis on domestic manufacturing. A centerpiece, which would put more than $22.8 billion toward the industry, is a new trust fund for federal grants to match state subsidies to encourage new factories. As much as $10 billion a year could be placed in the fund, with the money to come from the import tariffs the administration has placed on China, rather than a congressional appropriation.

The legislation is co-sponsored by Senators John Cornyn, Republican of Texas, and Mark Warner, Democrat of Virginia, and Representatives Michael McCaul, Republican of Texas, and Doris Matsui, Democrat of California. It could be rolled into the next economic stimulus package or a defense bill that may be considered this summer.

The measure follows a bill introduced in late May by Senator Chuck Schumer, Democrat of New York and the minority leader, and Senator Todd Young, Republican of Indiana, that would expand the National Science Foundation and increase funding by $100 billion over five years in areas like artificial intelligence, robotics and advanced manufacturing. Senator Tom Cotton, Republican of Arkansas, is also working on a bill to fund the chip industry.

Comment by Riaz Haq on July 26, 2020 at 5:01pm

#SiliconValley giant Intel to outsource manufacturing after falling behind on its next big chip #manufacturing improvement to 7 nanometer semiconductor #technology. Is this the end of the chip-making leader and the #US dominance of the chip industry? https://fortune.com/2020/07/23/intel-chip-manufacturing-delay-7-nan...

Intel spooked Silicon Valley and many of its investors on Thursday, announcing that it had fallen a full 12 months behind schedule in developing its next major advance in chip-manufacturing technology.

In an unprecedented development, Intel said that as a contingency it would use a competitor’s manufacturing facilities if it could not resolve the delay quickly. The company could use “our fabs or somebody else’s,” CEO Bob Swan said on a call with analysts.

Intel’s stock price, which had previously gained just 1% so far this year, plunged 10% in after-hours trading, despite the company’s having announced solid results for the second quarter.

The surprise delay of the chipmaking technique known as seven nanometer brought back bad memories of Intel’s multiyear delay in achieving the previous advance, known as 10 nanometer. (With seven-nanometer technology, designers can fit more transistors into the same amount of space, increasing performance.) Rival Advanced Micro Devices, which relies on Taiwan Semiconductor for manufacturing, was already leading Intel in the race for the next chipmaking advance, but now could gallop farther ahead. AMD’s stock, previously up 30% in 2020, jumped an additional 7% after hours.

Apple, which last month said it was dropping Intel’s chips from its desktop and laptop computers, has also used Taiwan Semiconductor to manufacture its chips.

Intel’s Swan, who took over in 2019 following the 10-nanometer glitches, said the new seven-nanometer technology was not producing enough useful chips to make it economical yet, owing to a defect. “We have root-caused the issue and believe there are no fundamental roadblocks, but we have also invested in contingency plans to hedge against further scheduling uncertainty,” Swan said on the analyst call. Products using seven-nanometer technology would arrive in later 2022 or early 2023, he said.

The chip industry’s once-steady improvements in semiconductor manufacturing gave rise to the famous Moore’s Law, coined by Intel cofounder Gordon Moore, which states that the number of transistors on a microchip doubles about every two years. Swan’s announcement appears to be an instance of Intel violating that law. But Swan told analysts the company had developed numerous other technologies to improve the performance of its chips even with the delay in seven nanometer.

On other fronts, Intel did better than analysts expected in the second quarter. Revenue increased 20% year over year, to $19.7 billion, over $1 billion more than the average analyst forecast. And Intel’s adjusted earnings per share of $1.23, up 16% from a year ago, beat the average forecast by 12 cents.

Comment by Riaz Haq on July 26, 2020 at 5:07pm

Congress Has Supported Moves To Revive Domestic Semiconductor Manufacturing, Here’s What Needs To Happen Next

https://www.forbes.com/sites/willyshih/2020/07/26/congress-has-supp...

Last week the Senate voted overwhelmingly (96-4) to include an amendment to the National Defense Authorization Act (NDAA) that provided support to the American semiconductor industry. The amendment combined the earlier American Foundries Act and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. A nearly identical proposal was included in the House NDAA, so that bodes well as the bill goes into the Conference Committee. But the vote does not authorize or appropriate funding for these policies, it only creates the policy framework.

The pandemic and worsening trade tensions have shined a light on worrisome issues with the supply chains that American industry and consumers depend on. Semiconductors are an area where the U.S. is heavily dependent on Asia. While the U.S. still has most of the leading design companies, we have comparatively few of the leading manufacturing facilities. In that critical sector we trail Taiwan, an island claimed by China that is one quarter the size of the state of Florida, and then South Korea, Japan, and China. The U.S. has gone from being first in manufacturing at the dawn of the industry to fifth, and companies in those countries who are ahead of us are investing aggressively. American makers of the production tools used in semiconductor factories have been moving their manufacturing to Asia as well, because that’s where their customers are.
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If Congress needs any additional impetus, it only needs to look to Intel’s recent announcement that it will delay the launch of its next generation chips, and that it was considering contracting out more of its manufacturing to make up for the delays. This should ring alarm bells for a number of reasons:

Intel has lost ground to AMD in the x86 microprocessor chip market because AMD has well designed products that are manufactured by Taiwan Semiconductor Manufacturing Company (TSMC). Don’t forget – a decade ago when AMD fell behind in manufacturing, it spun off its fabs (which became the foundation for GlobalFoundries) and turned to TSMC to produce its chips. TSMC is able to make AMD’s chips with its most advanced processes which are now even further ahead of Intel. The only place Intel can go to catch up with AMD is TSMC, so the pressure on them to outsource to there (Intel already is an important customer) will be intense.
Apple AAPL -0.2% recently announced that it will shift away from using Intel microprocessors in its Mac computers to chips of its own design that will be fabricated at TSMC. One could argue that Apple was only a small share of Intel’s volume, but don’t forget – the last time Apple shifted its Mac chip supplier – from PowerPC chips made by IBM IBM -1.2% and Motorola/Freescale to Intel – that marked a significant turning point in IBM’s decline and eventual exit from semiconductor manufacturing.
TSMC’s proposed fab in Arizona is only a token investment with insufficient capacity to support even a small fraction of the needs of Apple, Qualcomm QCOM -0.9%, Nvidia NVDA +0.6%, Intel, Amazon AMZN +0.7%, Google GOOGL -0.6%, and other American design shops. The proposed fab has a capacity of 20,000 wafer starts a month, a drop in the bucket compared to ~250,000 wafer starts per month at a single one of TSMC’s Gigafabs in Taiwan. And TSMC has three Gigafabs going on four spread over three science parks on the island.

Comment by Riaz Haq on July 28, 2020 at 9:52pm

#Tech giant #Intel fires #Indian-#American chief engineer Murthy Renduchintala for production failures. Murthy's ouster marks increased pressure on Intel after disastrous admission last week that knocked $40 billion off its market value https://theprint.in/economy/intel-fires-its-indian-origin-chief-eng... via @ThePrintIndia

San Francisco: Intel Corp. ousted Chief Engineering Officer Murthy Renduchintala, the executive in charge of the company’s vast chip-design and manufacturing organization, less than a week after saying it has fallen further behind rivals in production technology.

The executive will leave Aug. 3, and his organization will be split up and led by other leaders. Intel said it was making the changes “to accelerate product leadership and improve focus and accountability in process technology execution,” according to a company statement on Monday.

Renduchintala’s departure marks an escalation of the pressure on Intel’s leadership following a disastrous announcement last week that knocked more than $40 billion off Intel’s market value and caused multiple analysts to question the future of its manufacturing organization, which has been a cornerstone of the company’s semiconductor dominance for decades. The Santa Clara, California-based chipmaker on July 23 said its plants had failed to keep up with the most advanced chip-production technology, signaling that the man tasked with fixing persistent production issues had failed.

When then-Chief Executive Officer Brian Krzanich hired Renduchintala from rival Qualcomm Inc. in 2015, he was lauded as someone with the experience needed to upgrade Intel’s design efforts. But the two leaders’ extensive recruitment of outsiders led to an exodus of longtime Intel senior executives during Krzanich’s tenure. That became a hindrance when Krzanich was subsequently dismissed for an illicit workplace relationship, leaving an absence of internal candidates ready and qualified to replace him.

After a seven-month search, Chief Financial Officer Bob Swan reluctantly took the CEO role, placing the company in the hands of another outside recruit. Renduchintala was one of those passed over the for top job.

Executive reshuffles and maneuvering for higher positions are part of corporate life. But throughout Intel’s more than 50-year history, the company has seldom looked outside its own ranks for leaders and has maintained an approach of developing its own executives. Another pillar of the chipmaker’s success has been to manufacture its own products, bucking the industry trend of outsourcing. Intel has argued that manufacturing and chip design should be done together, shunning rivals’ approach of focusing just on design and letting third parties do the building. The company’s message was always clear: Intel has the most advanced plants, and that goes a long way toward making the best processors.

Maintaining that innovative advantage became Renduchintala’s job when Swan promoted him to the chief engineering role, but any sense of progress regaining its edge was destroyed last week when the company said the latest technique for building the most advanced semiconductors was a year behind schedule. That gives rivals the opportunity to appeal to computer makers with their own versions of the pitch that’s been so successful for Intel in the past: Their products are made with technology that’s years ahead of the competition. The latest setback followed a multiyear delay in Intel’s efforts on the previous manufacturing process. The company’s stock slumped 16% on Friday and fell 2% more on Monday.

Comment by Riaz Haq on July 29, 2020 at 4:09pm

Inside Intel: A Look At The Mega Chipmaker

https://www.investopedia.com/articles/markets/100214/inside-intel-l...

Never has a corporation done so much with something so little. Founded in 1968, Intel Corp. (INTC) has been the world’s leading manufacturer of microprocessors and chipsets almost since its inception. Today Intel is easily the largest semiconductor company in the world, about half again as large as closest competitor, Samsung Electronics Co., Ltd., and more than triple the size of the next-largest domestic producer, Qualcomm Inc. (QCOM).


What separates Intel from most other semiconductor companies is that it fabricates its products in-house. The bulk of semiconductor “manufacturers” farm the actual work of creating the products out to foundries in China. Intel even fabricates chips for other companies, for the most part ones too small to be considered true competitors. Is that a conflict of interest? Not really. Fabrication plants can cost several billion dollars to build, and it makes sense for Intel to keep its busy. (For more, see: The Semiconductor Industry Handbook.)


Intel does indeed assemble chipsets in China, but at Intel-owned facilities. It is received wisdom among some American doomsayers that low labor costs make China the default base of manufacturing operations for U.S. corporations that want to save a few pennies per unit and “ship jobs overseas.” That claim is more accusatory than it is true. At the end of 2016 Intel had a multitudinous workforce of 106,000, approximately half of whom were employed in the United States. Almost half of Intel’s chipsets and microprocessors are manufactured at home, at facilities in the suburbs of Phoenix, Albuquerque, N.M., and Portland, Ore. Outside of China, most of the remaining Intel products are developed in Israel. (For more, see: A Primer for Investing in the Tech Industry.)


The Incestuous World of Chip-sourcing

Even given that Intel fabricates other companies’ chips at its facilities, the business of developing internal computer hardware, selling it, and branding it is more incestuous than you might think. For instance, as of 2007 Apple Inc. (AAPL) began using Intel chips exclusively in its Macs, supplanting the PowerPC CPUs that Apple itself helped develop as part of a consortium. In 2018, it was reported that Apple may use Intel chips exclusively in its new iPhones. By comparison, smaller companies subcontracting to Intel isn’t even that big of a deal.

Moore's Law


Intel’s surviving cofounder, Gordon Moore, lends his name to the most famous observation in all of technology. Formulated in 1965, Moore’s Law states that transistor density doubles every two years. Not only has the observation held ever since, but Intel has officially incorporated the law into its company strategy. The company is behind the development of 450mm wafers, the widest in existence, yet still less than a millimeter thick. Once in production, they should allow the exponential progress of Moore’s Law to continue for at least another generation.

So who’s buying all these Intel chips? In 2008, the answer was unambiguous. Hewlett-Packard Co. (HPQ), Dell and International Business Machines Corp. (IBM), not coincidentally the three-biggest computer manufacturers at the turn of the century, were together responsible for $3 of every $4 Intel took in. A mere six years later, with bulky personal computers no longer the devices of choice for a global clientele that values portability and speed, Intel now has eight major customers that are responsible for 75% of its revenues. In 2016, Intel's three largest customers were responsible for 31% of the firm's accounts receivable. Intel might obey Moore’s Law, but the Pareto Principle (a.k.a the 80/20 rule) is a different story.

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