By Bolaji Ojo

What’s at stake:

Semiconductor makers perform better when production capacity utilization rates and the number of plants closely match customer demands. Those periods are getting fewer, however. Despite the proliferation of advanced demand-supply management tools, the industry continues to experience forecast distortions, especially in the number of semiconductor fabs needed to meet future demand. We describe the result as “MisCapex,” a condition of overestimating or underestimating capital expenditure requirements, leading to either bloated production or undercapacity. In either case, the remedies used so far by the industry continue to yield the opposite of desired objectives.

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The semiconductor industry goes into a fab building frenzy every few years, driven by undercapacity that eventually leaves chipmakers dried out financially or swimming in the murk of excess inventories.

The last time this happened was only a few years ago.

Electronics companies reacted differently to the last bout of shortages. Some made plans to build more fabs while many others quietly watched the situation unfold, preferring to maintain their conservative capex planning. Today, companies in the latter category look prescient while others are dialing back on their commitments. Intel Corp., for example, is reviewing its capex commitments under new CEO Lip-Bu Tan and sharply cutting back expenses related to capital equipment and operations, including R&D.

In the face of more pressing and troubling issues, the semiconductor industry is trying hard to ignore its recent financial past. Yet, factors related to capital expenditure cannot be swept under the carpet because they are so fundamental to the health of the sector. The industry is finding itself locked in the grips of capex promises made at the height of the last supply shortages. Promises made to customers, consumers and even politicians will soon come back to haunt the industry. The Ojo-Yoshida Report is getting ahead of that Day of Reckoning by examining statements about and commitments to fab construction a few years ago and asking: Are the fabs promised during the last shortages still needed; How many of the fabs will be built and; how will chipmakers finance the ones they cannot walk away from?

Read More »Capex Malaise and ‘MisCapex’ Pains

Most business forecasts often turn out wrong, but analysts and companies keep churning them out. Are forecasts doing more damages than good in the electronics market?

Intel’s new CEO used the opportunity of his first major public speech to provide a personal narration of his education, professional background and philosophical drivers.

By Peter Clarke  

What’s at stake:

Is it a bird? Is it a plane? No, it’s Lip-Bu Tan coming to save struggling chip giant Intel Corp. But how? Whatever incoming CEO Tan has communicated to Intel employees, the company’s future cannot be business as usual. One possibility is that Tan was asked by the board if he is the CEO to execute on the existing ‘product-plus-foundry’ strategy and he said “Yes.” I doubt it. It is more likely Tan told the board he would only accept the role if he had complete freedom to operate, including the option to divest Intel’s manufacturing operations. Indeed, the fate of Intel’s manufacturing arm may have been decided even before Tan came on-board.  

Veteran semiconductor executive Lip-Bu Tan has accepted the position of CEO at Intel Corp and is re-joining the board of directors after a six-month absence.  

The highly-regarded Tan now comes back as the permanent CEO to replace Pat Gelsinger, who was ousted in December 2024. The financial markets clearly approved as on the news of Tan’s appointment Intel’s languishing share price popped by 12 percent. 

Since the announcement of Tan’s appointment, many observers have picked up on a sentence in Tan’s message to Intel employees. He said: “Together, we will work hard to restore Intel’s position as a world-class products company, establish ourselves as a world-class foundry, and delight our customers like never before.” This has been taken as evidence that the ‘product-plus-foundry’ strategy continues at Intel.

I think that is a naïve reading of the situation. There is other evidence to consider. 

Read More »Lip-Bu Tan must split up Intel