Intel Corp (NASDAQ:INTC) is a US giant that is on the decline with the semiconductor giant being overtaken by smaller foreign rivals.
Small chipmakers surpass Intel
Recently the chip maker announced that the production of its latest 7nm CPUs will be behind schedule spelling the challenges the company has been facing. This comes after the previous generation 10nm chips also took longer than anticipated. Unlike most semiconductor firms, Intel usually designs and manufactures its computer chips.
The company has been overtaken in the design sector by local competitors and UK-based ARM Ltd. that recently took Apple Inc.’s (NASDAQ:AAPL) business from it. Also, on the fabrication front, the company has lost ground to TSMC (NYSE:TSM), which focuses on manufacturing chips on behalf of other companies and has had less trouble in manufacturing its next-generation CPUs on schedule. Currently, TSMC has a high market value relative to Intel.
Internal issues blamed for the decline of Intel
Intel’s failures are most likely due to company-specific factors. According to observers, the insistence on vertical integration made Intel miss on learning opportunities from innovations created by other firms. Also, the focus on existing high-end markets resulted in the company stumbling in emerging markets for cheaper CPUs. Intel also might have had some bad decisions on fabrication technologies as it also faced personnel challenges at the helm.
Interestingly, Intel’s fall could also be a sign of the US’s failure to do enough in backing the chipmaking industry. This is expected to intensify the need of the US government to chip in and help the falling giant. So far, legislators are considering a $25 billion subsidy program aimed at supporting chip companies to compete with Chinese rivals that are heavily supported by the government.
Currently, Intel is among the largest recipient of subsidies from the government, and its CEO has been lobbying for the new bill, and it will significantly benefit from the program. Supporting chipmakers will help the US from relying on foreign firms for chips.