The Intel Split

This bit about tools isn't new; Gelsinger announced Intel's support for Synopsis and Cadence at last March's announcement of Intel Foundry Services, and of course they did: Intel can't expect to be a full-service foundry if it can't use industry-standard design tools and IP libraries. Intel and Microsoft are bound by history, of course, but obviously their businesses are at the opposite ends of the computing spectrum: Intel deals in atoms and Microsoft in bits. Think about the EAD issue I explained above: it must have been a slog to cajole Intel's engineers into abandoning their homegrown solutions in favor of industry standards when the only beneficiaries were potential foundry customers - that is one of the big reasons why Intel Custom Foundry failed previously. The key thing to understand about chips is that design has much higher margins; Nvidia, for example, has gross margins between 60~65%, while TSMC, which makes Nvidia's chips, has gross margins closer to 50%. Intel has, as I noted above, traditionally had margins closer to Nvidia, thanks to its integration, which is why Intel's own chips will always be a priority for its manufacturing arm. Intel is obviously not splitting up, but this TSMC investment sure makes it seem like Gelsinger recognizes the straitjacket Intel was in, and is doing everything possible to get out of it. To that end, it seems increasingly clear that the goal is to de-integrate Intel: Intel the design company is basically going fabless, giving its business to the best foundry in the world, whether or not that foundry is Intel; Intel the manufacturing company has to earn its way, including with Intel's own CPUs. Gelsinger was once thought to be next-in-line to be Intel's CEO; he literally walked out the door in 2009 and for a decade Intel floundered under business types who couldn't have dreamed of building the 486 or the tools that made it possible; now he has come back home, and is doing what must be done if Intel is to be both a great design company and a great manufacturing company: split them up.