July 21 (Reuters) - For Intel Corp Chief Executive
Pat Gelsinger, an obvious strategy in his high-stakes bid to
make the company a player in producing chips for others would be
a transformational acquisition, analysts say.
But there is just one problem - a dearth of acquisition
targets for Intel to buy.
The conundrum came into focus last week when the Wall Street
Journal reported that Intel was considering a purchase of
chipmaker GlobalFoundries for $30 billion. Intel reports
earnings Thursday, and despite a booming PC market, analysts
expect a 9.8% drop in sales to $17.8 billion as Intel loses
share to rivals like Advanced Micro Devices Inc.
Buying a foundry would give Intel "real customer support
people, as opposed to technologists who have mainly been told
what to do by management," said Dan Hutcheson, chief executive
officer of VLSI Research. "It took Samsung 10 years to build up
a foundry business."
But analysts question the price tag for GlobalFoundries, and
conflicts could arise because some of the foundry's major
customers, such as AMD, compete against Intel.
GlobalFoundries Chief Executive Tom Caulfield told Reuters
on Monday he plans to take the chipmaker public in 2022 as
previously planned and dismissed talk of an Intel deal. A person
close to Mubadala Investment Co., the Abu Dhabi state investor
that owns GlobalFoundries, told Reuters earlier this week there
are no active discussions with Intel.
Stacy Rasgon, an analyst with research firm Bernstein,
pointed out that if Intel wants to buy a large foundry and
cannot buy GlobalFoundries, there would be few other options.
Two of the next largest players, China's Semiconductor
Manufacturing International Corp and Taiwan's United
Microelectronics Corp, would almost certainly be
off-limits for political reasons.
Hutcheson said that if Intel cannot buy a foundry business,
its only other option may be to go after smaller chip firms that
still own some of their own factories, like On Semiconductor
Corp and Analog Devices Inc.
For decades, Intel aimed to make the world's fastest
computing chips. That focus on the cutting-edge meant that Intel
discarded older chipmaking technology - called "process nodes"
in the industry - relatively quickly.
But most of Intel's would-be rivals in the foundry industry
take a different approach, keeping older technology around to
make cheaper chips for customers who do not require the latest
"TSMC does an excellent job of keeping process nodes for
many years," said Kevin Krewell, principal analyst at TIRIAS
Research. "When they build a new fab, they keep the old ones
Intel's ability to buy, build or re-purpose foundries for
outside customers even as it tries to regain its competitiveness
in advanced chips may prove a tall order at a moment when the
industry is stretched globally for talent, equipment and
"There may be internal limits to how many facilities Intel
can bring up," said Dean McCarron, president of Mercury
Research, which tracks market among chipmakers. "Clearly they
want more capacity - as does the rest of the planet."
(Reporting by Stephen Nellis and Saeed Azhar; Editing by
Jonathan Weber and Diane Craft)