Intel Corp plans to build communications chips at its own plants rather than just using outside contractors, as the world's biggest semiconductor maker tries to boost sales in the money-losing unit.
Intel said at an analyst meeting last month that it's starting to bring much of the communications unit's manufacturing in-house, after years of leaving the work to outsiders.
That means putting the techniques behind making its best-selling computer processors into communications products, a shift that may be its top advantage as Intel tries to take market share from slower-moving rivals. If the company designs better manufacturing methods and balances factory time between its long list of chips, investors said Intel may have the upper hand.
"They are getting confident that they are gaining traction," said Graham Tanaka, whose Tanaka Capital Management owns the stock and manages US$160 million. "I'm only pleased when I see a lot of profits, but I'm getting more encouraged."
Weighing the risks
There are risks. Any time chipmakers make radical changes, there's a fresh chance to make mistakes. Rivals such as Broadcom Corp that use contractors don't have to spend on equipment and factories that may not be kept busy when demand slumps.
Still, Intel's new semiconductors will probably be faster than rival offerings and cheaper to make, analysts and investors said. As clients try to reduce costs and lure customers back with new features, the company says it has found an advantage.
"Manufacturing is the key card," said Sean Maloney, the executive vice president running the communications business.
"More than anything else, it's manufacturing."
Communications-chip sales slid 38 percent last year, with some sub-markets declining 70 percent or more as clients go out of business or slash spending to cope with surging debt levels.
Intel's communications unit had an operating loss of US$150 million in the first quarter on sales of US$518 million, compared with a US$153 million loss on US$775 million in sales a year earlier.
The unit represented 7.6 percent of Intel's revenue.
"They're still losing an awful lot of money," said Brooks Gray, an analyst at Technology Business Research Inc.
Intel won't say how much the move will cost or might save.
It's hard to know before seeing how much work Intel brings in-house, investors said. Stockholders figure it fills the plants, spreads out depreciation expenses among more chips and lowers payments to contractors.
Long-term strategy
In 1997, Santa Clara, California-based Intel started buying companies that made chips for communications and fiber-optic gear.
The acquired companies contracted their manufacturing out. After Intel purchased them, it continued to use those so-called foundries to build the chips.
That will change next year. Intel will do most of the manufacturing for key products such as fiber-optic chips in its own plants, Maloney said. The rest will stay at the foundries.
The move will speed up plans to shrink the circuits in those semiconductors, which helps make them faster. At the same time that it starts to use super-thin wires in its PC processors, the company will add them to its communications chips.
Rivals are slower to adopt the latest changes in manufacturing for communications and networking chips. Even top foundries in Asia can't craft features as small as Intel can.
Taiwan Semiconductor Manu-facturing Co (台灣積體電路公司), the world's biggest chip foundry, builds transistors that measure 100 nanometers, according to estimates from Insight 64. While that's more than 1,000 times thinner than a human hair, Intel transistors are just 70 nanometers, the researcher says.
"Not all transistors are created equal," said Insight 64 analyst Nathan Brookwood.
CLOSURES: Several forest recreation areas have been closed as a precaution, while some ferry and flight services have been suspended or rescheduled A land warning for Tropical Storm Danas was issued last night at 8:30pm, as the storm’s outer bands began bringing heavy rain to southeastern regions, including Hualien and Taitung counties, and the Hengchun Peninsula (恆春半島), according to the Central Weather Administration (CWA). As of 9:15pm, the storm was approximately 330km west-southwest of Oluanpi (鵝鑾鼻), Taiwan proper’s southernmost tip, moving north-northeast at 10-20kph, the CWA reported. A sea warning had already been issued at 8:30am yesterday. The storm had maximum sustained winds near its center of 83kph, with gusts of up to 108kph, according to the CWA. As of 9:30pm last night, Kaohsiung, Tainan,
POWERFUL DETERRENT: Precision fire and dispersed deployment of units would allow Taiwanese artillery to inflict heavy casualties in an invasion, a researcher said The nation’s military has boosted its self-defense capability with the establishment of a new company equipped with the US-supplied High Mobility Artillery Rocket System (HIMARS). The company, part of the army’s 58th Artillery Command, is Taiwan’s first HIMARS unit. Minister of National Defense Wellington Koo (顧立雄), who presided over the formation ceremony in Taichung on Friday, called the unit a significant addition to the nation’s defensive strength, saying it would help deter adversaries from starting a war. The unit is made up of top-performing soldiers who received training in the US, according to the Ministry of National Defense. The HIMARS can be equipped with
Taiwan yesterday said it was looking forward to attending an upcoming memorial in Japan to mark the 80th anniversary of the atomic bombing of Nagasaki, a day after the Japanese city said it had retracted its previous decision to not invite Taiwan to the event. The case has been dealt with by Taiwan’s representative office in Fukuoka and the Nagasaki City Government, the Ministry of Foreign Affairs said. The ministry would decide who to send to the Aug. 9 event once it receives the invitation, it added. The ministry made the remarks following a Japanese media report on Saturday that said Nagasaki Mayor
UNILATERAL: The move from China’s aviation authority comes despite a previous 2015 agreement that any changes to flight paths would be done by consensus The Mainland Affairs Council (MAC) yesterday slammed Beijing for arbitrarily opening the M503 flight route’s W121 connecting path, saying that such unilateral conduct disrespected the consensus between both sides and could destabilize the Taiwan Strait and the wider region. The condemnation came after the Civil Aviation Administration of China (CAAC) earlier yesterday announced it “has activated the W121 connecting path of the M503 flight route,” meaning that west-to-east flights are now permitted along the path. The newly activated west-to-east route is intended to “alleviate the pressure caused by the increase of flights,” China’s state-run Xinhua news agency quoted China’s Taiwan Affairs Office
RSS