Here's Why Intel's Profits Could Soar

Up until a few years ago, (NASDAQ: INTC) kept its semiconductor manufacturing prowess to itself. This strategy worked well when Intel had a clear edge in manufacturing technology over the rest of the industry. It was effectively impossible for rival AMD to truly catch up.

But times have changed. Foundry TSMC, which AMD now relies on for manufacturing, is the undisputed leader in semiconductor manufacturing. Intel's edge has disappeared. To catch up, the company must invest heavily in new facilities and new manufacturing technology. But if it were limited to only making its own chips, primarily PC and server CPUs, the economics would be hard to justify.

Under the model where Intel only makes chips for itself, manufacturing investments have a short lifespan. Once Intel moves its PC and server CPU families to new process nodes, those old process nodes quickly become obsolete. There are plenty of types of chips that use mature, cost-effective process nodes, such as power management chips, but designing those types of chips isn't Intel's core business.

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Source Fool.com