Intel used to dominate the U.S. chip industry. Now it's struggling to stay relevant

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Intel has missed most of the significant technology transitions over the past 15-plus years, losing its standing in the chip industry along the way.

Intel, once the biggest and most valuable U.S. chip company, has been surpassed by numerous rivals in recent years due to a series of missteps.Intel is now the worst-performing tech stock in the S&P 500 this year, while rival chipmaker Nvidia is the second-best performer in the index.Intel CEO Pat Gelsinger speaks while showing silicon wafers during an event called AI Everywhere in New York, Thursday, Dec. 14, 2023.

"Intel is a big iconic semiconductor company which has been the leader for many years," said Nicholas Braithwaite, managing partner at Celesta Capital, which invests in semiconductor companies. "And I think it's a company that is worth trying to save, and they have to come back to competitiveness.""I think everyone has been hearing them say the next quarter will be better for two, three years now," said Counterpoint analyst Akshara Bassi.

Within five years, Apple started shipping hundreds of millions of iPhones. Overall smartphone shipments — including Android phones designed to compete with Apple — surpassed PC shipments in 2010.-based chip instead of Intel's x86 technology which was created for PCs in 1981 and is still in use. Intel has since lost share in its core PC chip business to chips that grew out of the mobile revolution.

The original 4004 used a 10-micrometer process. Now, TSMC's best chips use a 3-nanometer process. Intel is currently at 7-nanometers. Nanometers are 1,000 times smaller than micrometers. In 2015, under CEO Brian Krzanich, it became clear that Intel's 10nm process was delayed, and that the company would continue shipping its most important PC and server processors using its 14nm process for longer than the normal two years. The "tick-tock" process had added an extra tock by the time the 14nm chips shipped in 2017. Intel officials today say that the issue was underinvestment, specifically on EUV lithography machines made by ASML, which TSMC enthusiastically embraced.

AMD, which barely had market share in server CPUs a decade ago, started taking its slice. AMD made over 20% of server CPUs sold in 2022, and shipments grew 62% that year, according to an estimateNvidia founder and CEO Jensen Huang displays products on stage during the annual Nvidia GTC Conference at the SAP Center in San Jose, California, on March 18, 2024.Graphics processor units, or GPUs, were originally designed to play sophisticated computer games.

Intel doesn't have a GPU competitor to Nvidia's AI accelerators, but it has an AI chip called Gaudi 3. Intel started focusing on AI for servers in 2018 when it bought Habana Labs, whose technology became the basis for the Gaudi chips. The chip is manufactured on a 5nm process, which Intel doesn't have, so the company relies on an external foundry.

Now, the march is starting to reach its destination, and Intel said on Thursday that it's still on track to catch up by 2026. At that point, TSMC will be shipping 2nm chips. Intel said it will begin producing its "18A" process, equivalent to 2nm, by 2025.

 

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