[Chip Talk] To Revive US Semiconductor Supply Chain... The Era of the 'Second Wintel Alliance' Has Begun

MS Orders $5 Billion Intel Chips
Intel Says "No Geopolitical Risk, Safe"

"We will actively support Intel's efforts to build a strong semiconductor supply chain in the United States. We will manufacture semiconductors using Intel's 18A (angstrom, 1.8 nm) process. We are in the midst of a very exciting platform shift that will fundamentally change the productivity of every individual organization and the entire industry."

Satya Nadella, CEO of Microsoft (MS), appeared via video at the 'IFS (Intel Foundry Service) Direct Connect' event held on the 21st (local time) at the McEnery Convention Center in San Jose, USA. Attendees paid close attention to his remarks. At this event, Nadella announced that MS had placed an order for $5 billion worth of chips from Intel, which plans to introduce the 1.8 nm process within the year. It was a moment that heralded the revival of 'Wintel,' which swept the global IT industry in the 1990s.

Pat Gelsinger, CEO of Intel, is delivering the keynote at the 'Intel Foundry Service (IFS) Direct Connect' held on the 21st (local time) at the McEnery Convention Center in San Jose, California, USA.
[Photo by Yonhap News]

Intel and MS once jointly led the popularization of personal computers. Intel, known as the 'semiconductor empire,' dominated CPUs installed in PCs worldwide, while MS ruled the market with its Windows operating system (OS). One can recall the window-shaped 'Windows' sticker and the 'Intel Inside' sticker next to it, commonly seen when buying a computer. In the PC market from the 1980s to the 2000s, the phrase 'hardware is Intel, software is MS' was common. After Apple's 'mobile revolution' reduced PC demand, the Wintel alliance dominated the PC market until 2021, when AMD overtook Intel as the number one CPU vendor.

The collaboration between Intel Foundry and MS chip orders can be aptly called the 'second Wintel era.' The core driving this new Wintel era is the 'supply chain.' Pat Gelsinger, CEO of Intel, said, "Making chips suited for the AI era is everything for Intel Foundry," adding, "Intel Foundry hopes to be the answer for global business and government customers seeking companies not exposed to geopolitical risks." Nadella's commitment to actively support Intel's 'U.S. semiconductor supply chain' construction aligns with this context.

Intel has limited experience with EUV (extreme ultraviolet lithography) ultra-fine processes, which are key to advanced semiconductor manufacturing. Nevertheless, the determination to collaborate on semiconductors within a 'safe' supply base in the U.S., without relying on Taiwan, home to TSMC?the number one foundry company?and South Korea, home to Samsung Electronics?the number two?holds greater importance.

The current Intel and MS alliance has greater scalability than in the past. Not only MS but also the increasing demand for AI semiconductors within the U.S. is expected to lead to customized chip orders tailored to each company. Google (Gemini), Amazon Web Services (Olympus), and Meta (Llama) are representative examples. According to market research firm Omdia, the global foundry market, which was $104.4 billion (approximately 139 trillion KRW) in 2023, is expected to grow to $153.8 billion (approximately 205 trillion KRW) by 2026.

If Intel secures orders from AI big tech customers, the 'Wintel alliance' can gradually grow in scale. It is already rumored that Intel Foundry has secured orders not only from MS but also from Qualcomm.

U.S. fabless (design) companies may concentrate their orders with Intel. According to Intel's announcement, its fine process technology is not inferior to TSMC or Samsung Electronics. If it succeeds in mass production of the 1.8 nm process by the end of this year, it could take the lead in the 2 nm ecosystem faster than TSMC and Samsung Electronics, which have declared the introduction of 2 nm processes next year. While it is uncertain whether Intel can match TSMC and Samsung in yield, even similar performance would likely secure orders from U.S. fabless companies.

Gina Raimondo, U.S. Secretary of Commerce, said at the Intel event, "OpenAI, Google, and others building and implementing large language models behind next-generation AI will need a 'mind-blowing' amount of semiconductors over the next few years," adding, "Demand for cutting-edge chips will 'explode.'" This was interpreted as hinting at the possibility of the second Wintel alliance evolving into an 'Intel and U.S. software alliance.'