- On the verge of its Unleashed event with historic Intel Foundry Services announcement, Intel's latest event featured the launch of its Ice Lake-SP server CPUs.
- Ice Lake-SP has been delayed by at least 1-2 years and continues to trail behind the competition significantly. This CPU embodies everything of the failed Intel in recent years.
- In 2019, Intel touted Aurora as the first 2021 exascale supercomputer. However, the 7nm GPU was already delayed, and the 10nm Sapphire Rapids CPU is also delayed into 2022.
- The Unleashed event was about the future, but the Ice Lake launch represents the present. Intel is not yet back.
Following incoming CEO Pat Gelsinger's recent Intel (NASDAQ:INTC) Unleashed event, and the general stock rally since his appointment, Intel is looking to carry forward this momentum with the Ice Lake-SP data center launch. For example, one comment that was expressed at the Unleashed event was "Intel is back".
Make no mistake, this new launch is highly impressive, the largest generational upgrade in probably almost a decade. However, the cautionary tale with Ice Lake-SP is that it is not launching when it was supposed to, having been delayed by many quarters, even though there really is no clear reason for the delay (as explained below, 10nm doesn't seem to be the main reason).
Overall, then, the importance of the Ice Lake-SP launch (and its performance improvements which may drive a large upgrade cycle) can't be understated, but the many delays shouldn't be forgotten as quickly either. Intel is still not yet back.
An earlier version of this article was titled "Ice Lake Embodies Everything Wrong With [The Past] Intel". Perhaps that was a bit of an exaggeration: as the recent management changes indicate, Intel is still very much in transition. From that view, the launch should remind investors to not expect this transition to happen overnight. From a stock perspective, that often means there could be a pullback in the future for a more reasonable entry point.
Investors Meetings often represent the most bullish management outlook about the mid or even long-term future of a company. As such, they can be a reasonable benchmark to compare a company's actual performance against. This article applies that approach to Intel.
Going back to Intel's 2019 investor meeting, and the event showcased several key announcements across Intel's major organizations, including the PC, process technology (7nm) and its data center roadmap. By now, the outcome of that meeting should be known to most Intel investors: while Intel actually did meet its PC and financial commitments, Intel significantly failed on the data center and process technology sides. While Intel's 7nm progress determined most of the company's stock performance in 2020, the data center delays should not be underestimated either.
For a brief refresher, Intel had promised Ice Lake-SP for Q2 of 2020. That's right, a full year earlier than the recent April 2021 launch event. (Of course, given the 10nm delays prior to 2019, arguably Ice Lake should have launched another year earlier, in Q2'19.) Intel's former chief engineering officer Murthy quite infamously said that Ice Lake-SP was planned to be a quick follow-up to the PC client Ice Lake CPU, which launched in Q3'19. However, already in 2019 it became apparent that Ice Lake would shift to the second half of 2020. For several months, Intel also kept denying further rumors of a delay into 2021, but the launch event unambiguously was titled "How Wonderful Gets Done 2021".
In short, Ice Lake-SP has quite a storied history for what ideally should have been "just another" CPU launch. This is the reason for the title of this article: Ice Lake-SP embodies everything that has gone wrong with Intel in the last multiple years.
As biggest evidence of Intel's data center fiasco, note that the 10nm fiasco itself cannot even fully account for the multi-quarter Ice Lake delays: all evidence clearly suggests that Intel's 10nm has, in fact, progressed on par or even ahead of Intel's (low) expectations since 2019 and even 2018. In other words, 10nm in all likelihood isn't even the reason for the push out of Ice Lake into 2021. In fact, in January Intel's CFO even acknowledged that he didn't expect Ice Lake to affect Intel's gross margins as much given the progress with 10nm.
As an outsider, one might reasonably expect that Intel would have been scrambling to gets its latest CPUs such as Ice Lake out ever since AMD (AMD) launched its game-changing Rome CPU in mid-2019. (Meanwhile, indeed, AMD already launched its next-gen Milan CPUs recently, although those were a rather small evolution.) Consequently, the next-gen Sapphire Rapids Xeon has also been delayed, obviously, and will likewise miss its original 2021 target.
Here's an apt example of the knock-on effects of Intel delaying its entire data center roadmap. As some might know, one of the side effects of the 7nm delay was that the Aurora exascale supercomputer would be delayed from Q4'21 into 2022. Aurora will combine Intel's Sapphire Rapids on 10nm with Ponte Vecchio GP-GPU on 7nm. However, the latest delays on the CPU side actually provide another reason for the delay: Intel will be unable to deliver neither its CPUs or GPUs.
In short, with Intel already being so much behind, these latest delays are just the nail in the coffin with regards to Intel's data center execution. Remember that Intel already planned for years to become a data center-first or data-centric company ("the data center is the new PC"), so these execution issues should be quite concerning for investors.
Having spent the entire article so far beating down on Ice Lake, a few words may be in order about the actual CPU and its technology. Because for all of the bearish sentiment so far, there is actually a lot to like about this CPU. (The bearish evaluation, as discussed, is simply a function of its late launch date/almost endless delays showing a lack of execution.)
For starters, it of course leverages the same (decent) architecture as in the client Ice Lake, Tiger Lake, Lakefield and Rocket Lake CPUs. In other words, this is a tried and tested (and delayed) architecture. Equally (or even more) important for the data center, core count is significantly boosted from 28 to 40. This is responsible for the >40% performance improvement Intel claims, and confirmed by reviews, and in some cases up to nearly +80%.)
Additionally, to feed the beast, interconnect is upgraded from PCIe 3.0 to 4.0, and the amount of DRAM memory channels is increased from six to eight. (Intel has even touted that it used some additional tricks to improve memory bandwidth by more than the increase from six to eight mathematically suggests, which AnandTech confirmed in its review and considered impressive.)
Let's also remember that Intel still has several major underappreciated technology advantages. While the usefulness of AVX-512 continues to be debated by some (at least on the PC side), this technology can be broadly used in the data center. The two most common use cases are HPC (number crunching) and AI. Intel calls the latter DLBoost. In these workloads, Intel will crush AMD since the performance per core is at least 2x higher: for AVX-512 workloads, Intel's technology advantage is effectively akin to having an 80-core CPU against AMD's 64 cores. There is in fact another quite important class of workloads where Intel has gained a similar advantage with Ice Lake, which is crypto, which has received speed-ups of 2-5x or even more. Thirdly, Intel still has its Optane memory as a differentiated technology for its platform.
The slide below shows what exactly happens when Intel's 40-core Ice Lake-SP can use its AVX-512 engine (for crypto, HPC and AI workloads) against AMD's 64-core Milan (a few credits should go to Intel for benchmarking against Milan so shortly after its launch).
Note that AI has become the most important class of workloads in the data center, and Intel achieves here obscene speed-ups of over an order of magnitude against AMD. Intel said that its geomean advantage was +50% performance in a set of 20 real-world AI workloads, and in the same test suite also beat Nvidia's (NVDA) A100 by 30%.
Lastly, on the security side, Intel is achieving parity by introducing Total Memory Encryption. Intel is also expanding its other security feature (which AMD does not have), called SGX.
In summary, while Intel called Skylake-SP in 2017 one of its biggest Xeon updates ever, Ice Lake-SP is certainly no less of a significant update. That is the biggest bull case for this CPU: since Intel still has >90% market share, Ice Lake-SP represent a significant upgrade for most data centers, which are obviously on the Intel 14nm platform. There are likely going to be quite a few upgrades in data centers because of Ice Lake (and Sapphire Rapids next year), which may drive upside data center revenue. However, the delays mean that it is launching almost four full years after Skylake-SP - despite an increasingly competitive environment.
In the grand scheme of things, which is Intel's investment prospects, the data center (i.e. not the PC) is Intel's key business for growth. As such, one would or should expect Intel's most bleeding edge technology to launch in this vital segment. However, as Ice Lake-SP demonstrates (with its 18 months delay after client Ice Lake) this continues not to be the case.
As such, there may be two schools of thought regarding the latest Ice Lake-SP launch. On one hand, as for example expressed by leading data center outlet Serve The Home, Intel in one fell swoop has gone from being hopelessly behind, to actually being a valid competitor again. On the other hand, as this article notes, Ice Lake-SP kept being delayed quarter by quarter even though Intel kept reiterating that its 10nm process was either in line or ahead of schedule.
Ideally, Intel should have simply canceled Ice Lake-SP and make sure to launch its successor Sapphire Rapids in 2021: since Sapphire Rapids consists of much smaller ~15-core chiplets (Intel's long-anticipated disaggregated design), it should actually have both higher yield (lower cost) as well as higher performance.
As a reminder, the simple Intel thesis is that demand for its CPUs and other silicon, mainly in the data center, will keep increasing over time driven by secular trends such as cloud and 5G. So overall, AMD being ahead by 10% or even 20% in benchmarks won't be devastating for Intel; that likely won't cause too much market share declines to offset the market's (and hence Intel's) general growth.
That is exactly what Intel has delivered. Before this launch, Intel was often behind by 50% or more. (And for some workloads, Ice Lake-SP is actually ahead by a large margin, it can really depend a lot on the specific workload of a customer.) However, incoming CEO Pat Gelsinger has stated that Intel's goal is to obtain absolute leadership in every category. That is still far from the case, and Ice Lake-SP's careless delays have postponed Intel's return to leadership in the data center by at least another generation.
As was noted by many at the time, Intel's January earnings were perhaps the first time Intel really acknowledged the impact of competition on its data center results (in the past, Intel would merely say it expected an increasingly competitive environment, or that competition was not more than it had expected). That validates the numerous comments in this article that Intel needed to launch Ice Lake-SP multiple quarters ago.
Intel expects the same competitive environment to continue into 2021, but as also discussed Ice Lake does improve Intel's competitiveness tremendously. As such, though, offsetting continued slow market share declines might actually be an upgrade cycle from customers moving from Intel's 14nm to its new 10nm CPUs.
Therefore, overall I remain quite neutral on the near-term data center prospects. Shown below for reference is Intel's data center performance (the red line is TTM revenue).
To guide the eye, what investors really should be looking at is the bottom of the 2020 cycle (in 20Q3), which at ~$6B is a full $1B higher than the bottom of the 2019 cycle (although the upcoming Q1 results should confirm if the bottom really has been reached). This should be indicative of quite decent growth.
As explained at length, the main risk was what didn't happen: the CPU's actual launch due to the countless delays. However, with Ice Lake-SP itself being a reasonable CPU and its successor Sapphire Rapids already sampling, this hence reduces the risk of Intel's forward-looking data center execution. Better late than never, one might say.
Additionally, looking past Sapphire Rapids, and Intel recently announced (or at least indicated) that it is planning to launch a data center CPU manufactured at TSMC (TSM) in 2023. In short, it took Intel seemingly forever to get Ice Lake (10nm) into the data center, but going forward the roadmap actually seems much more straightforward.
On the heels of the Intel Unleashed event in late March, Intel is launching its Ice Lake-SP, hoping to further regain investor confidence with the "Intel is back" mantra. However, while the former event certainly delivered in big way regarding Intel's future, the same can't be said about the present, which is the Ice Lake-SP CPU.
Once touted by management as being a "close" follow-up to the client Ice Lake CPU, it should be noted that Intel's PC group already launched its successor Tiger Lake half a year ago. As described in this article, the delays are quite inexplicable given that they can't (fully) be ascribed to the 10nm delays.
The best way to view these delays is to look at what has changed competitively because of Intel's lack of data center execution. Instead of the recent "How Wonderful Gets Done 2021" launch event being the launch event for Sapphire Rapids, which very realistically could have overtaken AMD, Intel merely launched Ice Lake-SP. (As mentioned, this also means that Intel can't even in principle deliver the CPU for its much-touted Aurora exascale supercomputer, as the 7nm Ponte Vecchio GPU was already delayed.)
Hence, for forward-looking investors, the question is if they are willing to ignore this launch, which embodies the Intel of the past, and instead look at the announced future changes by incoming CEO Pat Gelsinger.
For this author, the answer is that as long as Sapphire Rapids isn't further delayed (which doesn't seem to be case, as it is already sampling), then Intel will have another large upgrade within just a year or less from now. I called Ice Lake Intel's largest upgrade in a decade, and I expect Sapphire Rapids to be anything but less than that as well; two such product launches in relatively quick succession should put Intel back on the map (from a long-term view).
This is also what the stock shows: the market has given Intel some time due to the CEO transition. Though, at this point considering the amount of time Intel will need to really get back to the top of its game, perhaps it would make more sense to await any pullback for an entry position.
This article was written by
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