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Apple’s New Mac Models With In-House Silicon Could Revive the PC Chip Wars, Analysts Say

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By Reuters | Updated: 10 November 2020

Apple on Tuesday is expected to unveil new Mac computers using its own in-house processor chips, a move that could reignite a race to control the market for desktop and laptop chips and benefit players such as Qualcomm.

The market has been dominated by Intel and Advanced Micro Devices since 2006, when Apple joined most other major computer makers in using chips based on Intel’s ‘x86’ computing architecture.

On Tuesday Apple is expected to start a two-year process of ending its nearly 15-year relationship with Intel by introducing Mac computers with Apple-designed chips based on computing architecture technology from Arm, which Nvidia has agreed to buy from SoftBank in a $40 billion deal (roughly Rs. 2,93,572 crores).

Apple will design the chips using Arm technology and have them manufactured by a partner, most likely Taiwan Semiconductor Manufacturing, which makes processors for Apple’s iPhone. UK-based Arm’s technology also powers most Android phones.

Apple’s forthcoming machines already have competition from Qualcomm, which since 2016 has worked with Microsoft to adapt the Windows operating system to Qualcomm’s Arm-based processors.

Qualcomm and Microsoft have worked with PC makers such as Lenovo and Asustek Computer to sell laptops using the new chips, and Microsoft’s own Surface Pro X released last year uses a Qualcomm processor.

Those devices are niche sellers today, but Apple’s entry into the market is likely to grab consumer attention around the emerging technology shift, especially if Apple begins to develop chips that rival Intel’s performance.

“Apple diving headstrong into Arm will speed this up,” said Patrick Moorhead, founder of Moor Insights & Strategy.

Arm-based PCs have key differences from Intel-based machines. Because the chips are derived from smartphones where power consumption is a key concern, they tend to claim better battery life than conventional machines. Like smartphones, they also turn on quickly and can remain constantly connected to cellular data networks.

“Where the connectivity has shined is the work from home situation,” said Miguel Nunes, senior director for product management at Qualcomm. “We see a lot of people realizing that their WiFi at home can’t keep up with everything.”

But hurdles remain for Arm-based PCs. Most software written in the past 20 years was for Intel machines, and until it is rewritten, it may have to rely on ’emulation’ that could slow down apps.

Intel’s chip lineup “enables people to use their favorite Windows applications without experiencing the potential performance penalties associated with running non-native apps on non-x86 architecture via Windows, or worry if their favorite applications will run on their platform,” Intel said in a statement.

Ben Bajarin, principal analyst for consumer market intelligence at Creative Strategies, said the critical test for Arm-based computers will be whether developers rewrite software used by big businesses, which are still the largest purchasers of machines. Apple’s entry to the market does not guarantee that will happen.

“Most of Apple’s hardcore developer base is going to be using Apple’s proprietary developer tools,” he said. But with Microsoft also providing development tools for Windows on Arm, a broader shift “is not outside the realm of possibility.”

© Thomson Reuters 2020

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Intel Floats Possibility of Licensing Chipmaking Deals but Would TSMC and Samsung Be Interested?

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By Reuters | Updated: 22 January 2021

Intel executives have raised the possibility of licensing chipmaking technology from outside firms, a move that could see it exchanging manufacturing secrets with rival Taiwan Semiconductor Manufacturing Co (TSMC) or Samsung.

Intel is one of the few remaining semiconductor firms that both designs and manufactures its own chips, but the business model has come into question in recent years as the company lost its manufacturing lead to the Taiwanese and Korean companies.

One option urged by some investors would be to outsource manufacturing. The company said, however, on Thursday that while it plans to increase its use of outside factories, the majority of its 2023 products would be made internally.

But licensing technology could help Intel avoid major investments in rivals’ factories that outsourcing deals would likely entail.

“Broadly speaking, that may mean sharing technologies that we have that they could use or leveraging technologies that others have developed that we can use as well,” outgoing Chief Executive Bob Swan told an earnings call.

That said, questions remain over how much a licensing deal would cost and whether a rival firm would even be interested.

Intel did not name companies it might license from but TSMC and Samsung are its only competitors for high-end chips.

“It seems a little weird to me that TSMC would give away to the keys to the kindgom unless there’s a sizeable payment that went with it,” said Stacy Rasgon, an analyst with Bernstein.

© Thomson Reuters 2021

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Intel to Replace CEO Bob Swan With VMware Chief Pat Gelsinger

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By Reuters | Updated: 14 January 2021

Chipmaker Intel said on Wednesday it would replace Chief Executive Officer Bob Swan with VMware Inc CEO Pat Gelsinger beginning February 15.

The company’s shares were up more than 8 percent in morning trading.

Intel, long the world leader in chip-making technology, has lost its manufacturing edge in recent years and is now debating whether to outsource some of it flagship central processor unit chips, or CPUs, slated for release in 2023. Activist investor Third Point LLC last month sent Intel’s board a letter asking it to consider whether to keep its chip design and manufacturing operations under one roof.

Gelsinger, a former Intel executive, has served as the CEO of VMware since 2012. During that time, he successfully guided the company, whose software helps companies squeeze more work out of data center servers, through the transition from privately owned data centers to public cloud providers, in part by striking a seminal deal with Amazon’s Amazon Web Services.

Gelsinger joined Intel when he was 18, and the company helped him attend Santa Clara University and Stanford University as he spent 30 years there. In a letter to Intel’s employees, Gelsinger likened the move to coming “home.”

“Having begun my career at Intel and learned at the feet of Grove, Noyce, and Moore, it’s my privilege and honour to return in this leadership capacity,” Gelsinger said in a statement. “I have tremendous regard for the company’s rich history and powerful technologies that have created the world’s digital infrastructure.”

Sources familiar with the matter told Reuters that Gelsinger had turned down the top Intel job before, and it was not immediately clear what had changed his mind.

Third Point’s Dan Loeb had sent a letter to Intel’s board of directors late last month urging the company to rein in an outflow of engineers to rival firms, though he stopped short of blaming Swan for the company’s troubles.

On January 4, Swan met with Third Point Chief Executive Dan Loeb and Intel Chairman Omar Ishrak, according to a person familiar with the matter. Loeb pushed Intel to find new executives and potential new board members and held at least one followup meeting.

VMware said it was initiating a CEO search and that Zane Rowe, the company’s chief financial officer, would serve as its interim chief after Gelsinger departs on February 12.

Intel on Wednesday also said that it expects to beat its financial forecast for the fourth quarter of 2020 and that it has made “strong progress” in addressing issues with its 7-nanometer chip manufacturing technology.

“From a credibility standpoint, he’s great – he’s probably the one at the top of most people’s list for who they would want to see,” Stacy Rasgon, an analyst at Bernstein, said of Gelsinger’s appointment.

“He had a long career there and he’s technical, so he can address both the technical issues and cultural issues. The issue is, what’s the ship look like that he’s going to be running? The next two or three years are set in stone regardless of who is there.”

Swan, a former chief financial officer from eBay, had served as Intel’s finance chief and was named its interim CEO when Brian Krzanich resigned in June 2018. Swan was made permanent chief in early 2019 after an extensive search failed to yield an external candidate.

© Thomson Reuters 2020

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Intel DG2 Graphics Chip Said to Tap New Version of TSMC 7-Nm Process

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By Reuters | Updated: 12 January 2021

Intel plans to tap Taiwan Semiconductor Manufacturing to make a second generation discrete graphics chip for personal computers that it hopes will help it combat the rise of Nvidia, two sources familiar with the matter told Reuters.

The chip, known as DG2, will be made on a new chipmaking process at TSMC that has not yet been formally named but is an enhanced version of its 7-nanometre process, the two people familiar the matter said.

Intel, long the world leader in chip-making technology, has lost its manufacturing edge in recent years and is now debating whether to outsource some of it flagship central processor unit chips, or CPUs, slated for release in 2023.

Activist investor Third Point last month sent Intel’s board a letter asking it to consider whether to keep its chip design and manufacturing operations under one roof.

Intel has long outsourced chips other than its flagship CPUs and is a major customer of TSMC, the world’s leading contract chip manufacturer. The head of Intel’s self-driving subsidiary Mobileye last month told Reuters that its next autonomous vehicle processor will be continue to be manufactured by TSMC on its 7-nanometre process.

With its graphics chips, Intel is looking to tap into the booming PC gaming market. Its DG2 chip is expected to be released late this year or in early 2022 and compete with Nvidia and AMD gaming chips that cost between $400 (roughly Rs. 29,400) and $600 roughly Rs. 44,100), the sources said.

The chip manufacturing technology for the DG2 is expected to be more advanced than the Samsung 8-nanometre process used in Nvidia’s most recent round of graphics chips released in the fall, the people said. They added it would also have a leg up on the Advanced Micro Devices graphics chips made on TSMC’s 7-nanometre process.

Intel declined to comment and TSMC did not immediately respond to a request for comment.

Intel officials last year said that it would outsource the DG2 chip but did not say which chip manufacturer had won the business or which chipmaking process it would use.

© Thomson Reuters 2020

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Intel Says Prepared to Work With Third Point Hedge Fund on Business Focus

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By Agence France-Presse | Updated: 30 December 2020

Intel’s shares rose sharply Tuesday after the computer chip giant said it was prepared to work with a hedge fund on changes to its business to boost shareholder value.

The market action came after Intel acknowledged receiving a letter from Third Point, led by activist investor Daniel Loeb. Intel rose 4.9 percent to close at $49.39 (roughly Rs. 3,600).

“Intel Corporation welcomes input from all investors regarding enhanced shareholder value,” the California tech giant said.

“In that spirit, we look forward to engaging with Third Point on their ideas towards that goal.”

Third Point’s letter said Intel should consider outsourcing its manufacturing operations to keep pace with rivals in the sector such as Taiwan-based TSMC and South Korean giant Samsung, among others.

“We suggest the board retain a reputable investment advisor to evaluate strategic alternatives, including whether Intel should remain an integrated device manufacturer and the potential divestment of certain failed acquisitions,” the letter stated.

While Intel remains one of the world’s leading chip companies, it has lagged behind rivals in the fast-growing segment of mobile devices, and its chips are being phased out by Apple, which is developing its own microprocessors for its Mac computers.

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Lawmakers Urge US to Further Tighten Restrictions on Chinese Chipmaker SMIC

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By Reuters | Updated: 23 December 2020

Two key Republican lawmakers on Tuesday urged the Trump administration to strengthen new rules adopted Friday aimed at preventing China’s biggest chipmaker SMIC from getting access to advanced US technology.

Senator Marco Rubio and Representative Michael McCaul said the Entity List designation by the US Commerce Department was not strict enough and should be rewritten to close “dangerous loopholes that would allow nearly all sales to SMIC to continue without restriction and support the (Chinese Communist Party’s) stated goal of military preeminence.” The letter said they were concerned that without changes the rules would be “utterly ineffective in addressing this growing national security threat.”

The Commerce Department declined to comment, but Commerce Secretary Wilbur Ross said Friday the designation was a “necessary measure to ensure that China, through its national champion SMIC, is not able to leverage US technologies to enable indigenous advanced technology levels to support its destabilising military activities.”

The lawmakers are concerned because the restrictions apply only to technology “uniquely” required to produce semiconductors at 10 nanometres and below. The administration “seems to be allowing SMIC access to nearly all semiconductor manufacturing equipment,” they wrote.

The lawmakers said they were concerned the new rules were “done for show and parochial commercial interests at the expense of US national security.”

SMIC said Sunday that being put on a US trade blacklist would pose a significant adverse impact to its research and development in its 10-nanometre and more advanced chip technology, but said it did not expect the US decision to have a major negative impact on its short-term operations and finances.

© Thomson Reuters 2020

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US Adds Dozens of Chinese Firms Including Chipmaker SMIC and Drone Company SZ DJI to Trade Blacklist

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By Reuters | Updated: 19 December 2020

The United States added dozens of Chinese companies, including the country’s top chipmaker SMIC and Chinese drone manufacturer SZ DJI Technology, to a trade blacklist on Friday as US President Donald Trump’s administration ratchets up tensions with China in his final weeks in office.

Reuters first reported the addition of SMIC and other companies earlier on Friday. The move is seen as the latest in Republican Trump’s efforts to burnish his tough-on-China image as part of lengthy fight between Washington and Beijing over trade and numerous economic issues.

The US Commerce Department said the action against SMIC stems from Beijing’s efforts to harness civilian technologies for military purposes and evidence of activities between SMIC and Chinese military industrial companies of concern.

The Commerce Department will “not allow advanced US technology to help build the military of an increasingly belligerent adversary,” Secretary Wilbur Ross said in a statement.

The department also said it was adding the world’s biggest drone company DJI to the list along with AGCU Scientech; China National Scientific Instruments and Materials, and Kuang-Chi Group for allegedly enabling “wide-scale human rights abuses.”

“The United States will use all countermeasures available, including actions to prevent (Chinese) companies and institutions from exploiting US goods and technologies for malign purposes,” Secretary of State Mike Pompeo added in a separate release.

SMIC and the other companies did not immediately comment.

But some lawmakers, industry executives and former officials raised questions about the impact of Friday’s move against SMIC. Generally, entity-listed companies are required to apply for licenses from the Commerce Department that face tough scrutiny when they seek permission to receive items from US suppliers.

But SMIC will only face a tough review standard when it seeks licenses for highly advanced US chipmaking equipment at 10 nanometers or below. Licenses for all other items shipped to the company will be reviewed on a case-by-case basis, the Commerce Department said.

“It’s a nice (public relations) line: ‘We’re putting it on this bad guys’ list,” said William Reinsch, a former Commerce Department official, who said he imagines the agency was already blocking shipments of such technology to SMIC. “As a practical matter … it doesn’t change anything.”

Republican Congressman Michael McCaul, ranking member of the House Foreign Affairs committee echoed Reinsch’s comments, saying he feared the rules were more “bark than bite.” “I have concerns it undermines the intent, and may create an exception for malign actors to evade US export controls” he said in a statement.

‘ARBITRARY SUPPRESSION’

But Chinese authorities did not mince words about Washington’s latest gambit.

In an address to the Asia Society on Friday, China’s State Councillor Wang Yi, who is also the country’s foreign minister, noted the expanding list of US sanctions and called on Washington to stop its “arbitrary suppression” of Chinese companies.

China’s foreign ministry said that if true, the blacklisting would be evidence of US oppression of Chinese companies and that Beijing would continue to take “necessary measures” to protect their rights.

“We urge the US to cease its mistaken behavior of unwarranted oppression of foreign companies,” ministry spokesman Wang Wenbin told a regular news conference in Beijing on Friday.

The Commerce Department released a list of 77 companies and affiliates to the so-called entity list, including 60 Chinese companies.

The designations by the Commerce Department include some entities in China that allegedly enable human rights abuses and some helping it construct and militarize artificial islands in the South China Sea, the agency said.

It also cited entities that acquired US-origin items to support the Chinese military and those engaged in the theft of US trade secrets.

Companies previously added to the list include telecoms equipment giants Huawei and 150 affiliates, and ZTE over sanction violations, as well as surveillance camera maker Hikvision over suppression of China’s Uighur minority.

FRAYING TIES

Shares in SMIC, formally the Semiconductor Manufacturing International Corporation, fell 5.2 percent in Hong Kong on Friday, while the company’s Shanghai-listed shares declined 1.8 percent. The benchmark indices in the two markets were down less than 1 percent.

SMIC had already been in Washington’s crosshairs.

In September, the Commerce Department mandated that suppliers of certain equipment to the company apply for export licenses after concluding there was an “unacceptable risk” that equipment supplied to it could be used for military purposes.

Last month, the Defense Department added the company to a separate blacklist of alleged Chinese military companies, effectively banning US investors from buying its shares starting late next year.

SMIC has repeatedly said that it has no relationship with the Chinese military.

SMIC is the largest Chinese chip manufacturer but trails Taiwan Semiconductor Manufacturing Company, the industry’s market leader. It has sought to build out foundries for the manufacture of computer chips that can compete with those of TSMC.

Ties between Washington and Beijing have grown increasingly antagonistic over the past year as the world’s top two economies sparred over Beijing’s handling of the coronavirus outbreak, imposition of a national security law in Hong Kong and rising tensions in the South China Sea.

© Thomson Reuters 2020

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