Fabless future no longer unthinkable for Intel

Investing.com -- Intel’s latest earnings report has reignited debate around a future without its own manufacturing. The company warned last week that it may stop pursuing nodes beyond its 18A process unless it secures a major external customer, raising the real possibility of Intel one day becoming a fabless company. While Intel remains committed to 18A—which will support its next three generations of products—canceling development of the next node, 14A, would mark a major twist. According to Bernstein analysts, the consequences for the wafer fab equipment (WFE) market would be significant, particularly for suppliers tied to extreme ultraviolet (EUV) lithography. Intel accounts for 20–25% of logic foundry capex and 10–15% of total semiconductor capex. Lasertec Corp (TYO:6920) and ASML (AS:ASML) are among the most exposed, with Lasertec deriving an estimated 28% of revenue from Intel and ASML about 9%. “It is especially negative to Lasertec as Intel contributes a bigger part of its backlog,” analysts led by David Dai wrote, estimating about 40% exposure. High NA EUV adoption could also be delayed, as Intel was expected to be the first mover in that space. For materials suppliers, the benefits would skew toward TSMC’s (NYSE:TSM) ecosystem. Hoya, the sole EUV mask blank supplier to TSMC, could theoretically expand its market share to 100% if Intel exits manufacturing and AGC loses its role as Intel’s supplier. “Ibiden also has sizeable exposure to Intel but should be immune, assuming Intel continues advancing its backend packaging technology,” the analysts added. On the foundry side, TSMC stands to gain the most, with Samsung Foundry also well-positioned. “TSMC clearly will benefit if Intel turns fabless,” the team noted. They also added that Samsung (KS:005930) could emerge as a strategic alternative in leading-edge logic manufacturing. As for Intel, Bernstein sees a degree of desperation behind the announcement. “One semi-plausible thesis around this is that it is a cry for help to the administration coupled with a veiled threat,” the analysts said. Furthermore, they cautioned that Intel’s announcement could hurt its ability to attract major customers, especially if those customers begin to doubt the company’s long-term commitment to manufacturing. Ultimately, the decision, “while potentially necessary for Intel’s longer survival in some form, creates substantial disruption and uncertainty around both the business and the stock which it seems prudent to avoid,” Bernstein concluded. Intel shares dropped 8% on Friday after the company signaled a possible exit from chip manufacturing. CEO Lip-Bu Tan also announced plans to cut more jobs, halt construction on two planned facilities in Europe, and slow progress on a third in Ohio, effectively abandoning his predecessor’s strategy of investing heavily in new plants to regain manufacturing leadership.