Intel plans to make product cuts, where will they be?

Intel plans to make product cuts, where will they be?

Analysis With a major downturn in revenue and profitability over the past six months, Intel has some tough decisions ahead as it seeks to make billions of dollars in cuts while the beleaguered semiconductor giant tries to enact its grand comeback plan.

As announced last week, the American chipmaker plans to reduce spending by $3 billion annually starting next year and then ramping that up to $10 billion by 2025.

While a good deal of these spending cuts will come from laying off a “meaningful number” of people, the company has also said that it will also look at “portfolio cuts.” This means Intel will look to cut loose some of the products it makes and sells.

In some cases, Intel may look to offload products to a willing buyer, like it has with the sale of its NAND flash and solid-state drive business. But in other cases, the company may decide to discontinue products and write them off, like it did with its Optane memory business back in July.

“We remain committed to optimizing our value creation efforts through portfolio honing; reallocation of resources to higher returns, higher-growth businesses; M&A; and, where applicable, divestitures,” Intel CEO Pat Gelsinger said on the company’s third-quarter earnings call a week ago.

While we don’t yet know where Intel will make product cuts, we decided to make some educated guesses for where the company can slim down its portfolio.

Habana AI chips

In December 2019, Intel made the seemingly hasty decision of paying $2 billion to acquire AI chip startup Habana Labs, just weeks after the company showed off fancy deep learning processors from a previous acquisition, Nervana Systems.

Knowing it needed a strong answer to Nvidia’s fast-growing business for AI chips, Intel apparently realized it had better chances with Habana, so it decided to end development of its Nervana deep learning chips to focus on the new acquisition.

Three years later, Intel has made some progress with Habana. Its Gaudi training chip is now available in cloud instances from Amazon Web Services, there are Habana-powered systems available from Supermicro, and the division is working on second generations of its training and inference chips, the latter of which is set to go in new servers from Supermicro, Inspur, and WiWynn.

The issue is, Habana is likely not making fast enough progress to deliver a meaningful blow to Nvidia’s multi-billion-dollar AI chip business anytime soon. So far, Intel has divulged few details on end users who have been using the Habana chips, and one of them is its recently spun-out Mobileye division.

The Habana chips still aren’t supported by oneAPI, Intel’s answer to Nvidia’s CUDA platform. Then there’s the fact that Intel has not made enough money from Habana to divulge sales in earnings.

Intel has positioned the Habana chips as more efficient alternatives to GPUs for large-scale AI training and inference, so if the processors can do their job, it may be worthwhile for Intel to hold onto for the long run. But with the company deeply in need of extra cash and Habana not making much money, Intel may be better off cutting the division loose to focus on its more flexible GPU architecture.

And yes, we know Intel’s GPUs aren’t making that much money right now either. But if Intel does indeed want to become a more viable competitor to Nvidia’s AI computing prowess, it needs a dedicated accelerator chip of some sort. And with the way Intel can recoup the costs of GPU development through multiple product lines, GPUs may make more financial sense.

Blockscale ASIC

Here’s a question worth asking: is the cryptocurrency mining industry stable enough for Intel to keep picking away at it? The x86 goliath only just started shipping its first Bitcoin-mining accelerator chip, the Blockscale ASIC, back in June, promising to provide an energy-efficient alternative to power-guzzling GPUs.

The issue is, things weren’t looking great for crypto-mining companies when Blockscale hit the market, and those conditions have not improved.

The Financial Times reported on Wednesday that crypto-mining companies are on shaky footing due to high energy costs and a plunge in cryptocurrency values that began earlier this year. The so-called crypto winter has already caused one datacenter provider for crypto firms, Computer North, to file for bankruptcy, and there are other firms facing significant financial issues.

This includes one of Blockscale’s first customers, Argo Blockchain, which warned last week that it is at risk of ceasing operations due to a lack of financing. Another early Blockscale customer, Griid, is facing allegations from its lender that the company has defaulted on its main line of credit.

Blockscale revenue can’t amount to much right now since the product’s business unit, Accelerated Computing Systems and Graphics, only brought in $185 million for Intel in the third quarter, and most of that is likely coming from the company’s GPUs.

Maybe conditions for the crypto-mining industry will suddenly get much better, and Intel’s bet on Blockscale will seem worth it in the long run. But in the midst of a struggling economy that may get worse, the company’s patience for Blockscale’s viability may run out sooner than later.

RealSense stereo cameras

Remember when Intel said last year that it was “winding down” its RealSense computer vision business? Turns out, that wasn’t completely the case as the company decided to hold onto its stereo camera devices while cutting loose its LiDAR, facial authentication, and tracking product lines.

Intel clearly has enough customers to justify continued development and sales of its stereo cameras, but we’re sad to say these fancy devices for robots and IoT devices would be an strong choice for the chopping block, whether that means discontinuing them or selling them to another company.

Simply put, the RealSense cameras are outside of Intel’s core chip focus. Yes, Intel benefits from being able to design the chips that go inside these cameras, but the sensors themselves? The development of such devices may not be a priority when the company needs to focus on making its chips — primarily CPUs — more powerful and efficient than competing products.

Intel CEO Pat Gelsinger said it himself when this reporter asked about his decision to wind down the RealSense business.

“Hey, there’s some good assets that we can harvest, but it doesn’t fit one of those six business units that I’ve laid out,” he said last year. The six divisions he referred to are Intel’s PC, datacenter, networking and edge, graphics, foundry, and recently spun-out Mobileye businesses.

NUC mini PCs

Don’t get us wrong. Intel’s NUC mini PCs are cool, little feats of engineering, especially the ones that can fit a Core i7 CPU and a mid-range graphics cards in a box that easily fits in your backpack.

Intel deserves ample credit for pushing the boundaries of miniature PC design and finding new ways to balance power, performance, and space in small form factors. But now that the company needs to make hard decisions about spending, it may be time to reassess the future of NUC under Intel.

Back in May, the chipmaker disclosed that it had sold more than 10 million NUCs since it introduced the Next Unit of Computing brand a decade ago. Ten million of anything is impressive, but we have to remember that hundreds of millions of PCs are shipped every year. Dell alone shipped nearly 60 million last year out of the 340 million total computers that were sent out in 2021.

It’s not that NUCs don’t provide value. While NUCs are enjoyed by enthusiasts, they are also used by many businesses around the world. It’s just that NUC sales likely represent a small percentage of the company’s total revenue, and making tiny, well-engineered PCs falls outside of the company’s core chip strategy. Thankfully, Intel is far from being the only company makes mini PCs now.

Intel had no comment on the matter at time of publication. ®

Do you have any thoughts on where Intel may make cuts in its product portfolio? Leave us a comment. Or, better yet, if you know what Intel’s plans actually are, you can always email us in confidence.

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