Editorial: Intel Refocuses Manufacturing

Intel’s new accounting approach gives financial responsibility to manufacturing, treating business units as internal customers. This greater accountability should help the overall profitability and competitiveness of its foundry business.

Bryon Moyer

Intel has given its manufacturing and process-development organizations a new model to improve efficiency and drive down costs. Accounting changes should reveal inefficient business practices, making the company’s foundry services more competitive with Samsung and TSMC.

Intel has struggled to acquire customers for its foundry business. Success requires providing the technology fabless companies seek and building chips profitably. Most industry attention has been on Intel’s race to develop five technology nodes in four years. But the new internal accounting method addresses profit by allowing manufacturing to operate as its own business.

Intel’s historical approach, which has funded its fab operations through cost allocations to business units, masks the sources of those costs. By measuring its own profitability, manufacturing can streamline operations to better meet the needs of external and internal customers—and do so at a profit. The company says it expects the changes to reduce costs by $3 billion this year and between $8 and $10 billion by the close of 2025.

In addition, Intel’s practice of discontinuing process nodes after only a few years has made it harder to attract foundry customers requiring longer supply guarantees. It now plans to lengthen the life of the 16 nm, 3 nm, and 18A nodes to offer customers extended availability while reducing operating costs.