1) Here is a short thread outlining the investment case for $INTC. Not investment advice.
$INTC’s EV/EBITDA is 5.5x vs an industry avg of 21x – mainly due to expectation that INTC will disappoint yet again.
These 4 components might make you think differently.
$INTC’s EV/EBITDA is 5.5x vs an industry avg of 21x – mainly due to expectation that INTC will disappoint yet again.
These 4 components might make you think differently.
2) $INTC has fallen behind the comp due to its stubbornness to sustain its rigid vertical integration whilst other semi players specialized (either in foundry or design).
The new IDM 2.0 strategy disentangles its foundry biz from its chip design innovation.
The new IDM 2.0 strategy disentangles its foundry biz from its chip design innovation.
3) IFS (foundry part of IDM 2.0) will serve external custom & INTC’s needs to achieve max utilization.
It’ll allow INTC to leverage it’s $100bn of high-quality assets, spread R&D cost, & increase margins over time.
They'll also outsource prod of some designs to ensure GTM.
It’ll allow INTC to leverage it’s $100bn of high-quality assets, spread R&D cost, & increase margins over time.
They'll also outsource prod of some designs to ensure GTM.
4) Investors think there's a danger of oversupply coz of INTC, $TSM, & Samsung ramping up capacity. Major counters to this are:
a) Growing disaggregation > demand for chips to serve specific functions.
b) Proliferation of devices.
c) Only these guys can make the latest chips.
a) Growing disaggregation > demand for chips to serve specific functions.
b) Proliferation of devices.
c) Only these guys can make the latest chips.
5) @PGelsinger is a 1-of-a-kind Silicon Valley leader. 1 of the most influential engineers of the past 40 years w/ ample experience in maintaining market leadership amid tough comp & political climate whilst generating substantial shareholder value (check out his tenure at $VMW).
6) Furthermore, he is INTC’s former CTO & was either lead architect or in charge of divisions that delivered Intel’s groundbreaking chips during the 80s, 90s, & 2000s.
Ultimately, his leadership is the key to the rest of the investment thesis.
Ultimately, his leadership is the key to the rest of the investment thesis.
7) $INTC is no longer just relying on reaching the next process node to deliver Moore’s Law.
It is increasingly adopting a modular packaging approach and has some innovative tech emerging as comp advantages.
It is increasingly adopting a modular packaging approach and has some innovative tech emerging as comp advantages.
8) It is extending its performance leadership in laptops & it’s very possible they can regain performance leadership in the server CPU market in next few quarters.
9) $INTC’s role in the HW ecosystem stemmed its mkt share decline despite trailing comp in the past 10 yr. As the standard setter suppliers continued to make parts compatible with INTC.
Things would have to go terrible from here to lose more mkt share – unlikely w/ @PGelsinger
Things would have to go terrible from here to lose more mkt share – unlikely w/ @PGelsinger
10) To sum up, taking on this specialization to achieve greater scale & flex whilst also benefitting from vertical integration of IFS & design may be highly rewarding for investors. An ambitious strategy but we can’t envisage a better leader than Gelsinger to take on the job.
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