Why Intel has lost its leading position in the
Semiconductor Industry?
Brief Context:
SIP or “Strategic Infliction point” is a point that happens in every industry, where the demand shifts
from something to another, like a business model or new technology etc. and example of that when
Nokia has the lion share of the mobile phones market, but when apple introduced the iPhone, this
created a Strategic Inflection Point, where Nokia failed to adapt quickly and ended up not existing in the
mobile phones market at all.
Explanation:
To answer the question in the headline we need to look back through history and search for those SIPs
and if you see intel’s actions at each point, you can clearly understand clearly, why intel has lost its
leading place, and an argument can be made that intel can keep losing some more.
I will mention Two SIP across the past 2 decades and hint on a new SIP we are living through right now.
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In 1984, intel was producing memory chips and losing market share, at the time intel made the
choice to transition from memory chips to microprocessors, as a result by, 1995 became the
world’s largest semiconductor company that leading the way in this industry.
In 2007, intel missed a critical SIP which was mobile devices, specifically Apple’s iPhone, where
Apple which was already a huge client for intel with the x86 CPUs which were used in iMac, and
later MacBooks and utilized to much power for a battery powered small device, Apple chose to
go with chips based on the much more power-efficient ARM architecture. The reason for this is
simply a management decision as Paul Otellini a past CEO of intel in an interview in 2013 with
the Atlantic.
“We ended up not winning it or passing on it, depending on how you
want to view it. And the world would have been a lot different if we’d
done it,” Otellini told me in a two-hour conversation during his last
month at Intel. “The thing you have to remember is that this was
before the iPhone was introduced and no one knew what the iPhone
would do… At the end of the day, there was a chip that they were
interested in that they wanted to pay a certain price for and not a
nickel more and that price was below our forecasted cost. I couldn’t
see it. It wasn’t one of these things you can make up on volume. And
in hindsight, the forecasted cost was wrong and the volume was
100x what anyone thought.”
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Intel is potentially facing as big of a strategic inflection point today as it was in 1984, where now
the opportunity is with Semiconductor technology, in 2020 Intel had massive issues with the
7nm production line, due two supply chain issues and workers’ inaccessibility, which allowed for
TSMC, a competitor to gain huge ground on intel, the situation for Intel was so dire that it had to
place orders for its own processors from TSMC while Intel fixed its 7nm issues. TSMC which has
huge market share in producing ARM processors mainly for Mobile Device had the opportunity
to grow in this sector.
Conclusion:
Semiconductor Industry, and Tech in General remains one of the most dynamic and rapidly evolving
Industries. In Order to Survive a company must always adapt quickly to challenges and lead the mantel
with innovation as well, we will see in the years to come as new technologies emerge and mature as %G
and AI, and “Only the Paranoid Survive”.
References:
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Murphy’s Law vs Moore’s Law: How Intel Lost its Dominance in the Computer Industry
Intel vs. TSMC: The Battle for Semiconductor Supremacy Heats Up
Paul Otellini's Intel: Can the Company That Built the Future Survive It?
Only the Paranoid Survive - Andrew S. Grove
Additional Reading:
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Disruption, disintegration and the dissipation of differentiability
The Innovator's Solution: Creating and Sustaining Successful Growth
Intel and the Danger of Integration
Chips and Geopolitics
Name: Ahmed Mohammed Fawzy
Section: 20