Intel Corp (INTC)

[VeeCee]

This analyst is always bearish on Intel. Nothing new but repeat the same theme with the current news.
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Intel: Foundry Prospects Dim with TSM-Apple Deal, IBM Progress, Says Piper
By Tiernan Ray

Piper Jaffray’s Gus Richard today reiterates an Underperform rating on shares of Intel (INTC), and a $20 price target, writing that the company “keeps investing in fabs and process technology that is likely to result in diminishing returns, in our view.”

Richard’s first point of concern is the article this morning by Jessica Lessin, Lorraine Luk, and Juro Osawa stating that Apple (AAPL) has signed a long-rumored chip deal with Taiwan Semiconductor Manufacturing (TSM) to move some production away from Apple’s chip supplier and arch-rival, Samsung Electronics (005930KS):

Taiwan Semiconductor and Apple have reportedly signed a three year foundry agreement for 20nm, 16nm and 10nm. We believe it is now unlikely for INTC to get any of Apple’s business in CY14 or CY15 and in a best case scenario only some of the business in CY16. We estimate Apple’s mobile processor business is a $5-6B/year. We also think it is highly unlikely for Samsung to broadly adopt Intel’s CPUs in its smartphones or tablets. We think this shuts the door on the high-end mobile market for Intel for the foreseeable future. We believe this also limits Intel’s ability to drive mobile and foundry revenue over the next two years.

Interestingly, Richard actually notes Taiwan Semi has stumbled in some of its production efforts:

Even though TSMC has signed Apple, it continues to fail to execute. It has been reported in the press that the Apple/TSMC deal was delayed due to power issues. Our contacts have confirmed the power consumption issues at TSMC at 20nm. This is on the heels of missteps at 40nm, 32nm and failure to meet customer demand at 28nm last year. We believe 16nm is unlikely to be in production at TSMC next year. While TSMC is not catching up with Intel, we do not think they are losing ground. TSMC remains a fast follower.

Despite Intel’s lead in chip technology, Richard actually thinks TSM, IBM and others pose a credible threat, in part because Intel doesn’t have the right intellectual property to fill the fabs:

We expect Intel to ship 14nm product at the end of this year. Right behind Intel is Samsung who is working on its first FinFET process and we expect Samsung to start shipping 14nm in CY14. Behind Samsung and Intel are TSMC, STMicroelectronics and IBM. Surprisingly, IBM and STM look to have surprisingly strong process technology at 14nm. IBM has a FinFET transistor built on Fully-Depleted Silicon on Insulator (FD-SOI) and STM continues to work on FD-SOI. We believe the IBM and STM processes provide low power and very good analog performance. While Intel remains in the lead in process geometry, we do not believe they have a lead in the SoC designs needed for the mobile era. Intel needs to drive either foundry or mobile revenue to fill its fabs in a stagnant PC environment […] We are seeing a resurgence in IBM’s foundry activity. We believe the company recently signed a licensing deal with ARMH for its 32-bit processor line for ASIC customers. Moreover, our contacts are telling us that they are making customer visits promoting their 14nm process.

http://blogs.barrons.com/techtraderdaily/2013/07/01/intel-foundry-prospects-dim-with-tsm-apple-deal-ibm-progress-says-piper/