“Even assuming that Intel closes factories, the plant in Israel will be one of the last”

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“Intel’s production capacity has been damaged in recent years and I assume they will transfer some flagship products to TSMC’s production,” Dedi Perlmutter, who was a senior vice president at Intel, told Calcalist Global. “This is a very dramatic statement, it is difficult for me to know what will happen with the company’s production, but TSMC does not have the ability to fully replace Intel today,” Perlmutter adds. “I do not think that Intel will sell some of the production systems in the near future, but Intel in the pit and this is not a small fault but a fault that has been going on for several years. If Intel does not manage to get out of the pit, they will transfer production to another company.”

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According to Perlmutter, who was Intel’s most senior Israeli and even a candidate to run the global company, there is a reasonable scenario that Intel will stop producing within a few years. “It mainly depends on the company’s ability to handle the faults it has and it’s not simple. The question is whether its people will develop advanced production technology in the next decade that will keep their factories. Intel will have a hard time maintaining its lead without production. “Opportunity to move forward. And once it does not work, it loses its advantage.”

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These harsh words are being uttered by Perlmutter in the wake of the storm sparked by the remarks of Intel Global CEO Bob Swan over the weekend. In a conversation with analysts, Swan said that Intel may outsource chip production. The statement led to a 16% drop in the company’s stock on Friday, and its worst day in 20 years.

Right: Intel Israel CEO Yaniv Gerti and Intel Global CEO Bob Swan. Will the giant company change strategy? Photo: Amit Shaal

The words of Perlmutter join the statements of hRepoNo less telling “Calcalist” Molly Aden, former vice president of Intel Global and former president of Intel Israel. “This is Intel’s admission that it has lost its technological leadership. It’s sad to hear at least one person who has worked most of his life at the company,” says Aden. “This is the first time that Intel’s global CEO has openly stated that the company is considering using production in other plants.” However, Aden emphasizes that in his opinion there is no danger to the local plant. “The plant in Israel is new and one of the most important. Of the latter. “

Should Intel Israel employees be apprehensive? probably not. The Intel plant in Israel is not in immediate or imminent danger of closing or moving into other hands. In Aden’s opinion, the plant in Israel is one of Intel’s advanced plants, and if any of Intel’s plants are sold, they will always prefer to close or sell the least advanced ones. “Intel will not sell the manufacturing plant in Israel so quickly because no one is running to buy such sites that cost about $ 9-10 billion.”

To my right Molly Aden and Dedi Perlmutter To my right Molly Aden and Dedi Perlmutter Photo: Elad Gershgoren

Intel Israel is currently the largest private producer in the economy with about 13,750 employees, of which 7,500 are development workers, 4,900 are production workers and 1,350 are Mobilai workers. Intel has a powerful horizontal impact on the Israeli economy. The company has acquired $ 1.8 billion from local manufacturers in the last decade. In addition, Intel is one of the largest exporters. The company’s exports in 2019 totaled about $ 6.6 billion. It is also the most diverse employer with an important foothold in the southern region. The decision of the global company in the future to leave the world of production is a dramatic decision, which it is clear that if it happens, it will have a huge impact on Israeli society and the Israeli economy.

To date, Intel has invested significant capital in Israel and has received generous grants from the country. By 2014, the company had invested $ 15 billion in Israel and received grants of $ 1.8 billion. In its investment plan for the coming years, by 2029, the company has committed to an additional $ 10 billion investment for which it is expected to receive a grant of about $ 900 million. Intel intends to meet all of its commitments to expand the new plant. The main danger to Intel’s plants lies in the years after the grant, that is, 2030 and beyond.

The effect of closing a plant will affect Israel on two levels. The first on Intel itself. Intel Israel, without a manufacturing plant that sends branches to the entire Israeli economy, is another development center in Israel, such as Microsoft, Google, Apple and every other giant. Although Intel is much larger, the footprint of a company that manufactures here is much more significant than a development center that mainly employs engineers. This means that a company that is only engaged in technological development does not have contact with all sections of the population.

There will also be an impact on the Israeli economy. Intel is the most technologically significant enterprise in Israel on which many hundreds of manufacturers and suppliers rely and a large part of the knowledge in Israel in this field is credited to the company. Intel’s exit from the field of production and its transfer to other hands could lead to a dramatic change in the level of connection of the plant to the domestic market.

“For more than 30 years, Intel has been ahead of most companies in terms of manufacturing technology, especially when it comes to component minimization,” says Molly Aden. “It was at least a generation ahead of everyone else. This allowed it to create smaller and faster transistors and lead in CPU performance. The problem started at Intel at 14nm and 10nm due to scheduling delays. These were due to new technology development issues and Intel lost its comparative advantage. “Currently, the company’s technology is slower and less miniaturized, and Intel’s biggest competitor, TSMC, is one generation ahead of Intel in manufacturing.”

According to Aden, “Most of Intel’s competitors focus only on design and production is carried out in the factories of companies that specialize in it. TSMC has tremendous production capacity. If the 10 nm technology is delayed, it is clear that the 7 nm technology will also be delayed. Shared. Not all Intel products need to be made with the most advanced technology. ”

As mentioned, Aden is worried about Intel’s technological future. “Today we are talking about 7 nanos, 5 nanos, and we may reach up to 3 nanometers, but the miniaturization will eventually stop due to physical limitations and the development of these technologies will become more expensive. The long-term question is whether Intel will develop such technologies in the future. “Before that in Kiryat Gat, which is one of the newest in the world and therefore does not stand in line. For the next five or ten years, I do not see its closure here,” says Aden.

Bob Swan’s statement about the company’s willingness to switch to using other companies’ manufacturing plants is an admission by the company that the company’s huge advantage over the others in the past has disappeared. In the analysts’ conversation Swan made following the results the company presented in the reports, he said that Intel is considering the possibility that some of the production of its future technologies will be in other manufacturing plants and not of the company as a complementary or on-site production.

The big problem and the big threat to Israel are what will happen if Intel tastes and finds that external production in this period is much better for it. In his bold statement Swan proved that he has no sacred cows. If until today Intel’s production was a sacred cow, then this issue is another area for discussion on the shelf. The sentence he said would free the company’s people from dependence on the company’s production and allow them to speed up the production of 7 – nm chips.



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