Intel

In certain industries long term capex decision is more important than shorter term capital allocation (eg share buy back) decisions cause the moat is affected. Incidentally these are industries that Buffett generally dislike.

"Well, they're pretty happy to buy from some of the Asian suppliers.' reminds me of Malaysia's FDI explanation:
https://www.freemalaysiatoday.com/catego...s-rafidah/

(09-05-2021, 04:04 PM)weijian Wrote: There are a multitude of reasons for Intel's decline. While the hopeless romantic pains at the decline of this Tech Giant, who is the brainchild of Bob Noyce/Gordon Moore - but I sense hubris as the message suggests that (1) Taiwan/Asia is unstable, (2) chips shouldn't be made in Asia etc.

Chip shortage highlights U.S. dependence on fragile supply chain

Lesley Stahl: Your business is extremely lucrative. In terms of revenue, you made $78 billion last year. Why should the government come in to a company, a business that's doing so well overall?

Pat Gelsinger: This is a big, critical industry and we want more of it on American soil: the jobs that we want in America, the control of our long term technology future, and as we've also said, the disruptions in the supply chain.

Lesley Stahl: You have spent much more in stock buybacks than you have in research and development. A lot more.

Pat Gelsinger: We will not be anywhere near as focused on buybacks going forward as we have in the past. And that's been reviewed as part of my coming into the company, agreed upon with the board of directors.

Lesley Stahl: Why shouldn't private industry fund this instead of the government? The industries that rely on these chips - Apple, Microsoft, the companies that are rolling in money?

Pat Gelsinger: Well, they're pretty happy to buy from some of the Asian suppliers.

https://www.cbsnews.com/news/semiconduct...021-05-02/

(10-05-2021, 08:53 AM)specuvestor Wrote: In certain industries long term capex decision is more important than shorter term capital allocation (eg share buy back) decisions cause the moat is affected. Incidentally these are industries that Buffett generally dislike.

..

I would argue that, if your goal is to invest long-term (>10 years) in any company, in hopes that they would outperform the market. Then you would like to invest in companies that prioritize long-term competitive advantage, regardless of industry.

(10-05-2021, 10:51 AM)Wildreamz Wrote:

(10-05-2021, 08:53 AM)specuvestor Wrote: In certain industries long term capex decision is more important than shorter term capital allocation (eg share buy back) decisions cause the moat is affected. Incidentally these are industries that Buffett generally dislike.

..

I would argue that, if your goal is to invest long-term (>10 years) in any company, in hopes that they would outperform the market. Then you would like to invest in companies that prioritize long-term competitive advantage, regardless of industry.

Unlike the too big to fail banks which require bail out, US government will basically subsidise Intel R&D (like Huawei in China) and ensure that Intel tries to get ahead in the game. 

With investment in the billions, Intel is the only horse the US government could bet on. TSMC will be welcome to set up shop but it will never be treated like an American citizen. 

My thoughts is that the risk reward ratio for Intel had fundamentally changed. 

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(10-05-2021, 12:05 PM)ongweehiang Wrote: Unlike the too big to fail banks which require bail out, US government will basically subsidise Intel R&D (like Huawei in China) and ensure that Intel tries to get ahead in the game. 

With investment in the billions, Intel is the only horse the US government could bet on. 

..

For now.

"Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it." Steve Jobs (1998)

I don't know whether Intel will succeed, just saying that R&D dollars alone, may not be a good predictor of success.

Innovation is one thing. Making them operational is another. What had changed before and after Steve Jobs got ousted is that he became more pragmatic. Actually his big idea generally remained the same for 20 years. I think IBM had been consistently first to develop advanced technological nodes. Prototype...

As usual it is holistic rather than just one figure. R&D dollar in a capex heavy industry is just one indication of comparative advantage. There are companies that put in a lot of capex but little comparative advantage. That is actually a red flag.

Actually it's not about Intel or AMD or Micron. It's going full circle now that it's not all about efficient capital allocation to lowest cost but also about strategic positioning and value add like having own production capabilities rather than outsource to others or asset light strategy. My 13 year old boy can find the cheapest stuff... ditto for trying to find cheapest PE or PB etc

Putting aside their (widening) loss to TSMC on the lead to cutting edge chip producing capabilities aside, these are exciting times as 4 years after they acquire Mobileye, some serious tangible progress is finally coming soon.

Mobileye to launch pilot for self-driving taxis in Munich, Tel Aviv in 2022

Mobileye, the Jerusalem-based developer of driver assistance technologies acquired by Intel Corporation for USD 15.3 billion in 2017, revealed this week that it is set to launch a pilot for autonomous taxis and ride-hailing services in Munich and Tel Aviv next year, in collaboration with German-headquartered international car rental and mobility service provider Sixt SE.

https://kr-asia.com/mobileye-to-launch-p...iv-in-2022

I would have thought IFS (Intel Foundry Services) would focus on leading edge technologies and go head to head with TSMS/Samsung in the foundry biz. But thinking again, Intel has been flirting with a lot of different things in the last 10 years and so...and so maybe this isn't a surprise.

Intel expands in specialty chipmaking with $5.4 bln deal for Israel's Tower

Intel Chief Executive Pat Gelsinger said Intel and Tower's technologies were complementary, with the foundry market at $100 billion and expected to grow sharply over the rest of the decade.

CFRA Research analyst Angelo Zino said the deal will help Intel acquire talent to develop its foundry business. "However, by the time (Intel) gets this business going, supply constraints will no longer be an issue and both TSMC and Samsung are both aggressively ramping up capacity in the next five years," he noted.

https://www.reuters.com/technology/israe...022-02-15/

In terms of technology, it is probably a given that Intel will not be catching up to TSMC/Samsung in at least the next 10-15 years. But IFS (Intel Foundry Services) could still be a very profitable business by finding its own niche while keeping its scale advantages. And as long as it can keep its scale (hence spreading R&D costs), its hope to eventually catch up will not completely vanish.

Intel’s foundry bet may split the market in three

This leader-laggard paradigm has resulted in a stable bifurcation of the market. TSMC and Samsung dominate the top-end, churning out chips used in smartphones, artificial intelligence servers, and crypto miners. Everyone else handles the low end, including components used in cars, smart speakers and industrial robots. Around 50 per cent of the foundry market currently consists of products made at 16nm and smaller, an area almost exclusively occupied by those two leaders.

Intel is likely to be caught in the middle.

https://www.businesstimes.com.sg/compani...rket-three

I think it takes quite a fair bit of technical knowledge to understand the Intel/AMD situation but from a layman's perspective, perhaps Nokia could be a relevant case study.

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Why Arm chips pose a threat to Intel and AMD’s PC dominance
https://finance.yahoo.com/news/why-arm-c...40226.html
"The UK-based chip designer is making a fresh push into the space via Qualcomm (QCOM) and its Arm-based Snapdragon X Elite and X Plus chips, which are rolling out in laptops from companies ranging from ASUS and Acer to Dell, HP, and Lenovo in the coming weeks...."

We Didn't Do Anything Wrong...[But Somehow We Lost]
https://infobwana.com/blog/we-didnt-do-a...ow-we-lost
"Key lessons
According to RVCJ Media, Nokia had been a respectable company. They didn’t do anything wrong in their business. However the world changed too fast and their competition was too powerful. “Nokia could have realised the importance of the business environment and the rapid changes in the trends of everyday people” Facebook user. "

It's ironic that Intel's Grove was the one that coined: Only the paranoid survive

Now even once underdog ARM wanted to buy a part of Intel on the cheap
https://finance.yahoo.com/news/intel-rej...42495.html