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It can be tough to recall that Intel Corp. invented the memory chip business half a century ago. It gave up on the field for more than a decade, starting in the 1980s, and has struggled since returning in 2006 to match the success of Samsung Electronics Co. in the historically low-margin product category. The bigger issue for Intel, however, is that memory-chip technology hasn\u2019t been advancing as quickly as more profitable gear. The limitations of memory chips are starting to lessen the value customers see in buying, say, Intel\u2019s lucrative server chips, threatening a central profit center.<\/p>\n\n\n\n
That\u2019s why Bob Swan, Intel\u2019s chief executive officer since late January, is sticking with his predecessor\u2019s push into a new kind of chip, called Optane, which the company says doesn\u2019t have the weaknesses of existing technology. According to Swan, Optane represents an evolution serious enough to keep pace with leaps that Intel has made in the data-center gear its biggest customers buy. \u201cWe think we have something special,\u201d he says.<\/p>\n\n\n\n
Analysts are skeptical, given Intel\u2019s checkered history with memory chips. \u201cIn what was at one point the best market in history, they were losing money,\u201d says Stacy Rasgon, an analyst at Sanford C. Bernstein. Swan says the ledger will start looking better soon.<\/p>\n\n\n\n
There are two basic types of memory chip, each with different advantages. DRAM (dynamic random-access memory) chips read and write data quickly but can\u2019t store it when a system is powered down; NAND (short for \u201cnot and\u201d) flash memory chips are basically the opposite in how they function. Intel says Optane chips can permanently store data and read and write it faster than NAND, if not faster than DRAM. The product, which went on sale at the end of last year, will require more investment in manufacturing before the company can mass-produce it. But it\u2019s been tested successfully by Alibaba Group Holdings Ltd. and Google\u2019s cloud division, according to the companies. \u201cThere are a lot of operations where you benefit from having all the data accessible to one processor,\u201d says Google product manager Paul Nash. \u201cWe think it is going to be commercially viable in a few quarters\u2019 time.\u201d Alibaba used the technology to support its massive Singles Day sales.<\/p>\n\n\n\n
Still, memory chips tend to be the most volatile slice of the $470 billion semiconductor industry. Only the Paranoid Survive, a seminal Silicon Valley history written by Intel co-founder Andy Grove, spends a great deal of time arguing that it was smart to get out of memory in the Reagan era. In some ways, the company\u2019s efforts to figure out the market still seem like a work in progress: Intel posted a $5 million operating loss in the NAND business last year, on $4.3 billion in revenue.<\/p>\n\n\n\n
Intel as a whole hit a record $71 billion in revenue during that period, but it\u2019s facing new obstacles at a pivotal moment. Delays in the rollout of manufacturing updates have undermined the company\u2019s lead in chipmaking technology for the first time in decades, and there\u2019s growing evidence that some of its biggest, most reliable customers are considering doing business with cheaper competitors or making their own chips. Cloud leader Amazon.com Inc., which uses a staggering number of server chips, in November unveiled a service based on its home-grown Graviton chips, saying the product would come with a \u201csignificantly lower cost.\u201d<\/p>\n\n\n\n
While he\u2019s an experienced chief financial officer, Swan has been at Intel only since 2016, and during his six months as interim CEO he repeatedly said he didn\u2019t want the top job permanently. Now that he has it, he\u2019s picking up the pursuit of memory from his predecessor, Brian Krzanich, who was ousted in 2018 for a years-earlier affair with a subordinate. Some investors had hoped Swan\u2019s background in finance would mean he\u2019d cut back on riskier bets in favor of more stable businesses.<\/p>\n\n\n\n
Intel says data-center operators spend about $15 billion a year on DRAM that would be better spent on Optane chips. And in Swan\u2019s reckoning, the only thing holding back Intel\u2019s memory-chip numbers recently has been all the money it\u2019s been spending to develop Optane. \u201cThe difference over the next couple of years,\u201d he says, \u201cis we\u2019ll have returns coming in.\u201d We\u2019ll remember he said that.<\/p>\n\n\n\n