Intel's Crisis and Korea's Semiconductor Opportunity... Who Will Be the Ultimate Winner in the AI Market? [AK Radio]

Focused Only on PCs Despite Market Changes
7-8 Years Behind Samsung and TSMC

Recently, rapid changes have been noticeable in the semiconductor industry. At the center of this is Intel's crisis and the resulting strategic shifts. Once leading the global semiconductor industry with an unrivaled position, Intel has suffered severe performance declines in recent years due to loss of competitiveness. Especially as the technological gap widens, uncertainty about Intel's future is growing increasingly.

[Image source=Reuters Yonhap News]

Intel once reigned as an absolute powerhouse in the PC market. When a new CPU was released, the whole world was enthusiastic and eagerly awaited the product, demonstrating its significant influence. However, with the advent of the smartphone era, the importance of PCs began to decline, and Intel's monopoly position gradually started to shake. Particularly, as the mobile era opened and many companies entered the smartphone market, Intel remained focused solely on CPUs, missing the trend of the times. As a result, Intel has continuously lagged behind over the past 7 to 8 years.

One of Intel's biggest crises was falling behind in the competition for advanced process technology. Intel operates as an integrated semiconductor company responsible for both design and manufacturing, but while competitors TSMC and Samsung Electronics rapidly advanced in fine process technology, Intel delayed technology adoption and was eventually pushed out of the market. In particular, Intel hesitated to adopt ASML's EUV equipment, essential for fine process technology, which allowed TSMC and Samsung Electronics to widen the technological gap significantly. Consequently, Intel remained stuck at the 14-nanometer process and could no longer innovatively improve CPU performance.

ASML is a semiconductor equipment manufacturer based in the Netherlands and is the only company worldwide capable of producing EUV equipment. Intel initially supported ASML with technology and funding to help develop the equipment but hesitated to adopt EUV equipment at a critical time, handing opportunities to competitors. TSMC and Samsung Electronics aggressively adopted EUV equipment, quickly transitioning to processes below 10 nanometers, and are now fiercely competing at 3-nanometer and 2-nanometer processes. Meanwhile, Intel's delay in adopting fine process technology caused it to fall behind competitors in CPU performance improvements.

Intel's crisis was not limited to manufacturing processes. Problems also arose in design. Intel had dominated the market for a long time by handling both CPU design and manufacturing, but competitor AMD shifted to a strategy focusing solely on design and grew rapidly. By divesting its foundry business and concentrating on design, AMD significantly improved CPU performance and actively capitalized on opportunities Intel missed, greatly expanding its market share. Especially, AMD has rapidly grown in the server CPU market, beginning to encroach on Intel's key market.

Apple's moves also dealt a significant blow to Intel. In 2020, Apple announced its self-developed M1 chip, completely excluding Intel's CPUs from its PC business, which had previously collaborated with Intel. Apple's M1 chip demonstrated remarkable performance, offering similar performance to Intel's high-performance CPUs while consuming less power. This increased the popularity of Apple products among consumers, and Intel suffered setbacks even in the high-performance PC market. Once rumored to be "tortured out of aliens" for its innovation, Intel's CPUs no longer appeal to consumers as innovative products.

Intel's problems are even more severe in the server market. As the AI era arrives, the importance of data centers and servers is increasing, but Intel is losing competitiveness in the server CPU market as well. AI servers require CPUs with high power efficiency, but Intel's CPUs still consume a lot of power and show slow performance improvements. In contrast, AMD is rapidly expanding its market share by releasing power-efficient server CPUs, and ARM-based server CPUs are also gaining popularity.

[Image source=Getty Images Yonhap News]

To overcome this situation, Intel has introduced various self-help measures. The most notable strategy is the spin-off of its foundry business. Intel had maintained competitiveness for a long time as an integrated semiconductor company handling both design and manufacturing, but due to recent market changes and technological gaps, it decided to separate the foundry and design divisions. This decision suggests that Intel can no longer secure a competitive edge in manufacturing processes, and the market views this as a structural crisis for Intel.

Intel's decision to spin off its foundry business became a major issue in the global semiconductor industry. By separating foundry and design, Intel is attempting to regain competitiveness, but whether this strategy will succeed remains uncertain. In particular, Intel has entrusted the manufacturing of its newly released Lunar Lake and Arrow Lake chips to TSMC, increasing distrust in its own foundry capabilities. If Intel's chips manufactured by TSMC succeed, it could be seen as an acknowledgment of failure in Intel's foundry business.

Meanwhile, Korean semiconductor companies are seizing new opportunities in line with the AI era. Samsung Electronics and SK Hynix are receiving positive evaluations, especially in the HBM (High Bandwidth Memory) market. HBM is a high-performance memory essential for AI and data centers, widely used in NVIDIA's AI servers, generating strong demand. SK Hynix leads HBM technology and supplies NVIDIA reliably, while Samsung Electronics is also expanding its market share in HBM.

However, a recent report by Morgan Stanley expressed concerns about Korea's semiconductor industry. Morgan Stanley downgraded the stock prices of SK Hynix and Samsung Electronics, warning that semiconductor demand may slow down in the future. It particularly pointed out that fierce competition in the HBM market could threaten SK Hynix's dominant position. Consequently, Korean semiconductor companies' stock prices temporarily declined, but with steady growth in demand for HBM and AI PCs, the long-term outlook remains positive.

With the arrival of the AI era, the semiconductor market is changing even faster. Especially as demand for data centers and AI servers explodes, demand for high-performance memory and CPUs is expected to continue increasing. In this situation, Samsung Electronics and SK Hynix are providing memory solutions suited for the AI era, solidifying their positions in the semiconductor market. The AI server memory market is expected to continue growing, representing a significant opportunity for Korean semiconductor companies.

Ultimately, Intel's downfall is causing major changes in the global semiconductor market, and attention is focused on whether Korean semiconductor companies can seize this opportunity. Intel maintained a dominant position in the semiconductor industry for a long time but lost competitiveness by falling behind in technological innovation and changes of the times. In contrast, Samsung Electronics and SK Hynix are responding quickly to the AI era and creating new opportunities. Intel's current crisis could become a greater growth opportunity for Korean semiconductor companies, enabling Korea to build a stronger position in the global semiconductor market.

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