Intel’s foundry ambitions cede the edge to AMD, analyst says
For several years now, Advanced Micro Devices (AMD) has eroded Intel’s market dominance in the processor segment. Intel, however, with a new CEO at the helm, designed its comeback program.
Recently, the chip giant announced its new integrated device maker (IDM) 2.0 strategy, which includes the launch of Intel Foundry Services (IFS), a new foundry business, and a $ 20 billion investment in two new factories in Arizona. The news was generally well received and indicated that the struggling semiconductor company was not about to fold and allow its rivals to take more market share.
However, the Northland analyst Gus Richard describes Intel’s latest initiative as a “strategic misstep” which is playing into the hands of its CPU rival.
“We don’t think TSMC will cede its manufacturing lead to INTC anytime soon and process technology leadership is pushing product and GM leadership higher,” said the 5-star analyst. “INTC’s expansion into the foundry market will make AMD a priority for TSMC and INTC will be persona non grata. For this reason, we expect AMD’s market share momentum to continue.
Richard calls TSMC the “clear leader in volume and processing technology,” and although Intel has said it will continue to manufacture its chips in-house, it also intends to outsource chip manufacturing to companies. third-party foundries, including TSMC. But the analyst says his decision to re-enter the foundry market and “maintain advanced manufacturing capacity” means meeting its needs will once again become “a low priority” at TSMC.
In contrast, since all of AMD’s and Xilinx’s peak volumes – soon to be part of AMD – are produced at TSMC, more wins for them means more business for TSMC.
“This will likely allow AMD to gain earlier access to the technology and better allocation of capacity, thereby strengthening the company’s leadership in x86 process technology for the foreseeable future,” said Richard.
As such, Richard reiterated an outperformance (i.e. buy) rating on AMD shares as well as a price target of $ 96. The analyst therefore anticipates gains of 24% over the coming months. (To see Richard’s record, Click here)
Now let’s move on to the rest of the street, where AMD has a lot of support. The stock has a moderate buy consensus rating, based on 16 buys, 4 takes, and 2 sells. Based on the average price target of $ 105.55, stocks should change hands for a premium of around 36% in a year. (See AMD stock analysis on TipRanks)
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