by George Gilder and Richard Vigilante
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This is a paid advertisement for Mode Mobile Regulation A offering. Please read the offering circular and related risks at invest.modemobile.com. | | | Let us bow our heads in thankful recognition of the end of an era in the fabled, fabulous history of electronics.
This past Monday, Pat Gelsinger resigned as CEO of Intel (NASDAQ: INTC), a post he held for less than four years. Having joined Intel as a precocious teenager and protege of the great Andrew Grove, Gelsinger symbolizes the Intel epoch that launched the age of microchips. If he had not been passed over as CEO in earlier years, Intel might never have lost its edge.
Gelsinger was a key part of the team that transformed Gordon Moore's law of biennial doubling of transistors on microchips from an Intel idea into a chip-world cliche. Now Gelsinger should proceed on to new paradigm electronics. That is, the electronics of wafer scale where hyperscale computers are inscribed and integrated on a single 12-inch wafer rather than diced into thousands of chips and encapsulated in plastic packages mostly in factories in Asia.
Gelsinger's possible enlistment in the nascent wafer scale movement with Elon Musk's DoJo "tile" computer for cars and with the pioneers of Cerebras in Sunnyvale, California, could turn the end of one era into the birth of a new electronics age.
But for the moment, Gelsinger's historic departure ends the last serious attempt to revive the manufacture of leading-edge microchips in the United States by U.S. companies. In the United States, Intel was the last great integrated device manufacturer (IDM)--a company that both designs chips and manufactures them--and one of the last of its kind in the world. | | Have You Seen This $11 Trillion 'Tech Strip?' While many folks today are wondering what to do with their money… a revolutionary "sheet" of new technology has quietly sparked an $11 trillion tech revolution.
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Click here to see how anyone can profit fast. | | | U.S.-based Texas Instruments (NASDAQ: TXN) does its own manufacturing, but for less demanding analog devices and on a much smaller scale, with revenues ranging from $15 billion to $20 billion since 2021. That year, INTC, already in decline, brought in $80 billion in sales. Micron (NASDAQ: MU) manufactures most of its own chips and reached $30 billion in revenue in 2021. The company has pioneered the High Bandwidth Memory technology at the heart of datacenter artificial intelligence (AI) systems. For another big integrated device manufacturer, you'd have to travel to Korea where Samsung--$30 billion in revenue--is facing problems not unlike Intel's.
As a protégé of Grove, the CEO who made Intel a great manufacturing enterprise, Gelsinger was brought in as CEO specifically on a plan to rebuild Intel's manufacturing group. Amid the nationalist trumpery of the U.S. government's "Chip Act" industrial policy, handing out money and mandating helter-skelter to Intel and its rivals, Gelsinger was probably doomed to failure from the outset, even as Intel remained one of the top three or four semiconductor designers in the world under his leadership.
All the world's leading chip design firms--Nvidia (NASDAQ: NVDA), AMD (NASDAQ: AMD), Qualcomm (NASDAQ: QCOM), Broadcom (NASDAQ: AVGO) and even Intel itself, in part, now outsource manufacturing, with Taiwan Semiconductor (NYSE: TSM) being by far their leading choice. TSM astonishingly holds nearly 60% of the world's chip manufacturing market. It is currently the only firm in the world capable of reliably and efficiently manufacturing the leading-edge chips used for AI processing.
To our masters in Washington, this looks like disaster, even a national security crisis. That's why the government recently reiterated its intention of giving INTC some $8 billion in grants and loans, but only on the condition that the company remain in the manufacturing business. | | Regretting your Options entry timing? Do you want help finding the optimal timing for entering and exiting your Options trades?
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Watch and learn right here > | | | To the contrary, had Intel gotten out of the manufacturing business a decade ago, it would not have lost some two thirds of its market value as it has in the past few years, nor would its chips have lost so much share in the personal computer market to AMD, which outsources all its manufacturing, most of it to TSM. Intel lost all that ground because it was designing brilliant chips that it insisted on manufacturing and then failed.
Chip manufacturing has never been simple; over the last 10 years it has become staggeringly difficult. In 1998, the last year Grove served as CEO of Intel, the Pentium processor included some 7.5 million transistors. Today's Intel Core Ultra has more than 17 billion transistors. The Apple M4 chip holds some 28 billion transistors. The Apple M1 Max holds more than 50 billion transistors. The new NVIDIA " Blackwell" AI "Superchip" contains some 208 billion.
To get to those numbers, companies have resorted to techniques far beyond the circuit shrinkage that drove Moore's Law with its biennial doubling of transistor count. Chip architectures have gone 3D. Designs have become astonishingly complex, signifying the mature stage of Moore's Law technology, which would have made any success of Intel as a worldclass manufacturer into a pyrrhic victory. For many purposes, the chip itself is on its way to being replaced by wafer-scale devices as pioneered by Cerebras and projected by Walter de Heer of Georgia Tech as futuristic graphene on silicon carbide 12-inch spans. Currently only TSMC is capable of manufacturing the Cerebras device.
With Samsung falling behind, not one company on the globe today excels at both designing and manufacturing the most demanding chips. Washington believes a few billion here and there can change that. No evidence supports the notion that silicon electronics is a matter of money rather than genius. Lawyers and politicians cannot replace TSMC physicists, chemists and engineers.
Does it matter that the United States now manufactures only 12% of the world's microchips?
TSM brings in $80 billion in annual revenue. The revenue of its top five customers sums to $663 billion. This includes Apple (NASDAQ: AAPL), which sells final consumer products, not chips. Yet that only goes to support the point. There is a lot more money in designing chips than in manufacturing them, and far more money in using them in clever products than in designing them.
To get even richer, start a business that would be impossible without chips. The combined revenues of AMZN, MSFT, GOOG and META sum to $1.4 trillion. Money is a problem only because governments are printing it profligately as if it could replace human creativity.
Global gross domestic product (GDP) in 2024 will be $110 trillion, probably half of which is enabled by microelectronics. Yet sales of all the semiconductors in the world will bring in revenues of about $600 billion, or about 0.5% of global GDP. The money goes to the users not the makers.
To be sure, it is inconvenient that the finest semiconductor foundry in the world lies only 100 miles off the coast of China, on an island that the United States conceded 50 years ago "is part of China." But that is all the more reason we should not be at war, not even a trade war, with China. Above all, we have no business harassing it in the South China Seas. And particularly after our decadal depredations in Iraq after 9-11, we have no business nagging China over its "reeducation" of Uighur separatists and terrorists.
While China became the industrial hub of the world economy, U.S. corporations, by various measures, gained between 49-70% of global market cap (compared to China's mere 10%). By any reasonable standard we have been exploiting China rather than the other way around. We should see China and its millions of engineers not as a military problem but as an opportunity for ingenious manifestations of the "Art of the Deal."
Sincerely,
George Gilder, Richard Vigilante, Steve Waite, and John Schroeter
Editors, Gilder's Guideposts, Technology Report, Technology Report Pro, Moonshots, and Private Reserve | | About George Gilder:
 George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives. He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance. George and his team are the editors of Gilder Technology Report, Gilder Technology Report Pro, Moonshots and Private Reserve. | | | | | |
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