Intel Is About to Relinquish Its Chipmaking Crown to Samsung

(Bloomberg Businessweek) -- Intel Corp. is on the brink of losing its status as the world’s largest chipmaker. For the first three quarters of 2021, Samsung Electronics Co. held a narrow lead in sales. The final numbers for the full year will be available in late January, but it seems likely that Intel will drop to second place. Even if the company holds on for another year, this has the appearance of a durable reordering..Investors are already acting as if Intel’s heyday has passed. Several other chipmakers have higher stock market values, including Taiwan Semiconductor Manufacturing Co. and Nvidia Corp., whose market valuation is more than three times that of Intel’s..No one is predicting Intel’s demise. It still produces the vast majority of the world’s computer processors, more complex than the memory chips Samsung specializes in, and rakes in an enormous amount of cash with high profit margins. Still, Samsung surpassing Intel would be a significant shift. Intel, one of the companies that first put the silicon in Silicon Valley, has dominated the $400 billion semiconductor industry for most of the past 30 years. It’s the foremost U.S. chipmaker at a time when the geopolitical implications of the industry loom particularly large..Chief Executive Officer Pat Gelsinger, who rejoined Intel in early 2021, aims to return it to leadership on the crucial area of manufacturing technology while also muscling in on the outsourced manufacturing business that TSMC and Samsung now dominate. Investors initially applauded Gelsinger’s approach, but they’re increasingly focused on its high cost and the time it may take to deliver results. It takes years to design a semiconductor, develop the technologies needed to produce it, and build the plants where it’s made. Gelsinger will be spending most if not all of this year doing the best he can with decisions his predecessors put in place..The rise of TSMC and Samsung, the stress the pandemic has placed on the supply chain, and the increased tensions between the U.S. and China have all heightened anxiety that the U.S. could be left vulnerable as a critical industry shifts its center of gravity toward Asia. In 1990, two years before Intel started its run as the biggest chipmaker, the U.S. accounted for about 37% of worldwide production. That’s down to about 12%, according to the Semiconductor Industry Association. Europe’s slice of that market has fallen even further. The Biden administration is considering ways to tighten restrictions on the sale of equipment to Semiconductor Manufacturing International Corp., China’s biggest chipmaker, and has said it wants to boost domestic manufacturing of semiconductors..Gelsinger has been a leading proponent of a proposal in Congress to devote $50 billion to support the building of chip plants in the U.S. But progress has stalled. It would represent an unprecedented piece of industrial policy. In the best-case scenario, subsidies could persuade Intel, TSMC, and Samsung to build more plants in the U.S., but not in 2022, given how long it takes to construct the multibillion-dollar facilities..Intel’s leader is trying to get the company to thrive even as its dominance wanes. Success in that goal would be relatively unprecedented in the chip industry—a place where his company has done so much to define the yardsticks for success. The brutal pace and expense of innovation means that once you fall behind, the road back to the top is usually too steep to climb. Read next: Washington Hasn’t Learned the Real Lesson of the China Shock.©2022 Bloomberg L.P.

Intel Is About to Relinquish Its Chipmaking Crown to Samsung

It’s a symbolic blow for the U.S. at a time when the geopolitics of semiconductors are trickier than ever.

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