Intel's Achronix Strategy

There have been several reports recently on Intel's agreement to build FPGA's for Achronix on their upcoming 22nm technology. As far as I know this is a first for Intel. Not only are they building someone else's designs on an Intel process, but they are building those devices on Intel's leading edge technology.

Intel makes the most money off of their leading edge process. In recent presentations Intel has made a big deal out of how quickly they are ramping their newest process technologies. Faster ramps mean earlier crossover from the old technology to the new technology. Driving towards earlier crossover means higher profit margins and shorter time to repay the development and retooling costs associated with moving to a new process node. So I have to ask: Why would Intel sacrifice any of their early leading edge capacity for what is essentially foundry work?

The articles I've seen have suggested 2 reasons. The first is that Intel is looking to offset some of the R&D costs of process development. The second is that Intel wants to get back into the Field Programable Gate Area (FPGA) game.

In my opinion, the idea that Intel is looking to offset R&D costs with this move is absolute rubbish. Anyone that is willing to take an objective look at this would come to the same conclusion. Let me give an example to demonstrate why I don't think this line of speculation is worth the pixels it takes to print it.

Suppose I can sell a product for $100 and it costs me $50 to make. Let's also say the design work costs me $1000 up front. So if I sell 1000 units, I make $50000 minus the $1000 for design work. I net a total of $49000.

In the foundry model, I save the $1000 design cost up front, I still spend $50000 to make the 1000 units, but then I can't sell them to the customer for $49000 because they want to make a profit as well. Recouping their design costs isn't sufficient. So let's say I can sell them for 70% of their market value. That gives me $35000 in profit.

The model here is grossly oversimplified, but it illustrates the point. Building my own designs I make $49000, and building product as a foundry I make $35000. That means I'm making significantly less on the foundry product, and last I checked, making less isn't going to help offset my development costs. Instead of helping me, it reduces my margins and increases the time it is going to take me to recoup my R&D investment. Remember, we are talking about Intel's leading edge technology here, not trying to fill fabs running and old technology and keep them profitable longer.

The second theory is that Intel wants to get back into the FPGA game. Intel once had an FPGA program and sold it. In the EE Times article a spokesman for Achronix was quoted as saying:

"If Intel wanted to be in the FPGA business they would be already. They certainly have the cash."

And he is right. If all Intel wanted was to be in the FPGA business, they would simply buy Achronix or a similar company.

I believe the author of the EE Times article comes close to explaining what Intel is doing when the author says:

The relationship with Achronix could be a precursor to Intel eventually combining programmable logic with its Atom cores on the same die to create a new type of device. Earlier this year both Xilinx and Actel Corp. announced products that combined their programmable logic technology with hard ARM processor cores.

In my opinion the author of the EE Times article isn't looking far enough ahead to see what Intel is really looking to accomplish. While Intel may well want to create a new device that combines Atom and FPGA circuitry, I believe there is a much larger scope to this announcement. This move is really about Intel's Atom SOC strategy, not just FPGA devices.

In order to be a real player in the SOC space (smartphones, autotainment systems, etc.) Intel needs to develop a robust SOC capability they don't currently have. Up to this point the SOC designs that I've seem Intel previewing are all in-house Intel designs. But many of the players in the SOC space have their own proprietary designs they build around the central processing core. To make that happen, Intel needs to learn how to build external designs on the Intel process.

But my reading leads me to believe that Intel's design rules are fairly restrictive when compared to the traditional foundries. Since we are talking SOC's here Intel can't just tweak the process for an individual customer. The external designs have to work well with the same process Intel is using to manufacture Atom. In order to work effectively with customers in this new space, Intel needs to learn how to work in conjunction with external design teams to get the designs laid out in a way that will take advantage of Intel's process capabilities and yield well.

I believe the Achronix move is actually a first step in Intel's SOC strategy. A strategy that will allow Intel's customers to design their unique features around an Atom core to make a truly unique product. If this strategy proves successful, Intel and their partners will be able to offer a distinct product with clear differentiation in the market place. This is how Intel intends to differentiate future Atom products from competing ARM products.