[Kim Pyeonghwa's Peace and Chips] Intel's Intent Behind Leading Cooperation with 'Samsung·TSMC'

Intel Emphasizes Semiconductor Packaging Standard Technology 'UCIe'
Lowering Costs and Enhancing Performance... Samsung and TSMC Also Profiting

Editor's NoteSemiconductors. We hear about them every day, but when it comes to explaining the concept, it's hard to find the words. They are called the rice of modern industry, so it's something you shouldn't be ignorant of, yet articles and books about semiconductors are often so difficult that people avoid them. But did you know that semiconductors are actually quite fascinating? Even a single semiconductor component hides the mechanisms of the entire industry and the interests of nations. Peace & Chips will spoon-feed you the hidden contexts and meanings of the somewhat uncomfortable semiconductor field. All you have to do is just hold out your spoon.

[Asia Economy Reporter Kim Pyeonghwa] Intel, which is seeking to expand its business in the foundry (semiconductor contract manufacturing) market, reportedly featured its competitors Samsung Electronics and Taiwan's TSMC at its event last week. One might expect them to boast, "We are far superior to our competitors!" but instead, they emphasized keywords like cooperation and openness with the two companies, which piques curiosity about the background. To give you a hint in advance, the characteristics of the foundry market and Intel's business challenges are the key.

Intel Dreams of an Open Semiconductor Ecosystem

On the 27th of last month (local time), Intel held 'Innovation 2022' in San Jose, California, USA. The event aimed to introduce Intel's innovative technologies to developers worldwide and expand its ecosystem. It is similar in nature to Apple's annual event called the Worldwide Developers Conference (WWDC), often referred to as a global developer festival.

In line with the event's purpose of ecosystem expansion, Intel emphasized keywords such as openness and cooperation from the very first day. In particular, they highlighted the 'UCIe (Universal Chiplet Interconnect Express)' consortium, which has been promoted since March to create an open ecosystem among semiconductor companies. This is an organization led by Intel to establish standards for semiconductor packaging technology. Semiconductor packaging here simply means stacking or combining multiple semiconductors. In the UCIe consortium, various companies have come together to enable chiplets (chip fragments) designed and manufactured with different process technologies to be packaged together. The idea is to create standard specifications that allow Intel's semiconductors, TSMC's semiconductors, and those from other manufacturers to be connected.

At the event, Intel announced that over 80 companies, including ARM, Qualcomm, AMD, Samsung Electronics, TSMC, Microsoft (MS), and Meta, participated in the UCIe consortium, emphasizing that "innovations once thought impossible have opened new possibilities." They even showcased representatives from Samsung Electronics and TSMC as surprise guests via video, flaunting their supportive statements to demonstrate cooperative relationships. Judging by the event's announcements alone, it was a heartwarming scene, but Intel faces significant business challenges that prevent it from being viewed as purely positive. This is about their glamorous return to the semiconductor kingdom.

Intel CEO Pat Gelsinger is delivering the keynote speech on the first day of Innovation 2022. / Provided by Intel

Intel IDM 2.0 Core 'Foundry'... Is Samsung and TSMC Also Benefiting?

Intel was once a leading company dominating the semiconductor industry, primarily focusing on central processing units (CPUs). While it is still not inaccurate to describe Intel this way, its past status was tremendous. After rising to number one in the global semiconductor market in 1993, it held the crown for over 20 years consecutively. However, it lost face when Samsung Electronics overtook it for the first time in 2017, leading to fierce competition. From 2019, it seemed Intel maintained the top spot again, but since last year, Samsung Electronics has been number one in terms of revenue. According to market research firm Omdia, Intel recorded $14.865 billion (approximately 21.42 trillion KRW) in revenue in the second quarter of this year, down 16.6% from the previous quarter, widening the gap with Samsung Electronics and remaining in second place.

To overcome business stagnation, Intel made a major decision last year. They dismissed Bob Swan, the then CEO who had been in office for only a year, in January last year and appointed Pat Gelsinger, former CEO of VMware, as the new CEO and savior. Gelsinger is a technical expert who worked at Intel for 30 years, including serving as Chief Technology Officer (CTO). He played a significant role in developing standard technologies such as USB and Wi-Fi, which explains why he particularly emphasizes UCIe.

After taking office, Gelsinger announced the 'Integrated Device Manufacturer (IDM) 2.0' vision in March last year to help Intel regain its former glory. The vision involves strengthening manufacturing capabilities that cover semiconductor design and production, with a particular focus on enhancing the foundry business. While TSMC and South Korea are competing in the 3 to 5 nanometer (nm, one-billionth of a meter) advanced process nodes, Intel remains at the 7 nm process, presenting a significant challenge. In this process, Intel appears to be prioritizing cooperation over immediate competition through UCIe to secure market opportunities.

TSMC and Samsung Electronics also benefit. Since it is difficult to develop technology by simply reducing circuit linewidths to achieve finer process levels, packaging various semiconductors can reduce manufacturing costs and complexity while improving performance. If there is an error in the packaged semiconductor, only the problematic chiplet needs to be replaced, which can increase yield (the ratio of good products among finished products). Standardizing the technology also shortens the time to market for semiconductors. In an oligopolistic market where these two companies hold 70% of the share, it may be more advantageous to increase the overall pie to share rather than just compete.