Intel’s Strategic Missteps and Future Outlook

Investing.com reports that Northland Capital Markets analysts criticized Intel (NASDAQ: INTC) for a “strategic error” in its turnaround efforts, notably due to outdated design methodologies and modernization challenges.

Key Issues Identified

According to Northland, Intel’s product designs have not evolved since the 1990s, leading to delayed and underperforming chips. They emphasize that Intel lacks reusable intellectual property (IP) blocks vital for efficient product development, relying instead on what they term “IP blobs” that are hard to reuse.

Optimism for Long-Term Prospects

Despite these challenges, Northland holds an Outperform rating on Intel’s stock, highlighting the company’s development of next-generation process technology. They assert, “we believe Intel’s value is in its process technology.”

Potential from Lip-Bu Tan

The analysts also mention the potential impact of Lip-Bu Tan, who recently left Intel’s board but is esteemed for his turnaround of Cadence Design Systems (NASDAQ: CDNS). They suggest Tan could be instrumental in revamping Intel’s design methodology and in attracting foundry customers due to his broad semiconductor industry connections.

Manufacturing Challenges

On the manufacturing front, Northland points out that Intel’s reliable “tick-tock” model—alternating between new architecture and new process technology—has stagnated since the 10nm process node. This has led to substantial overbuilt capacity at outdated nodes, with 80% of Intel’s output still depending on 14nm/10nm processes, which are viewed as non-competitive.

Geopolitical Factors

Despite these issues, Northland sees geopolitical factors as a reason to remain optimistic about Intel. They suggest potential disruptions in the semiconductor supply chain due to China’s plans concerning Taiwan around 2024-2027, coinciding with the 2024 US elections and growing international conflicts. Northland believes this risk positions Intel’s manufacturing processes and fabs as strategically valuable assets that are likely to succeed.