What happened
Shares of Intel (INTC 1.28%) were on the rise again in defiance of the overall tech sector, a trend that began last week amid revelations of China's ability to produce a 7 nanometer chip in defiance of U.S. export controls.
It was more of the same today, as speculation emerged that the next potential phase of chipmaking equipment restrictions on sales to China could end up benefiting Intel.
Shares rose as much as 3.8% in early morning trading before settling into a 1.6% gain as of 1 p.m. ET. Still, that was notable compared with the broader Nasdaq Composite, which was down about 0.6% on the day at that time.
So what
Today, the Taiwan-based tech publication Digitimes suggested that the U.S. could next target advanced packaging equipment sales as part of its efforts to contain China's chip development.
While the U.S. has already clamped down on the most advanced front-end machines, such as EUV machines from ASML, it appears China has been able to use refurbished older machines and less-efficient double patterning to make an advanced 5G chip for the recently unveiled Huawei Mate 60 phone.
The U.S. doesn't really care about advanced phones in China, but it does care about China's ability to make artificial intelligence (AI) systems. And AI systems not only require advanced front-end processes to make leading-edge chips, but also advanced packaging that stitches together various GPU, CPU, interposer, and high-bandwidth memory components in order to work. Since leading-edge chips are becoming more and more expensive to scale on the front end, many chipmakers are turning to "chiplet" architectures, in which different parts of a processor are actually made separately, optimized, then stitched together through advanced packaging into a single chip system.
While nothing is yet set in stone, any restrictions on packaging equipment and lower chip packaging activity in China or Taiwan could benefit Intel.
Although Intel has fallen behind rivals in leading-edge technology nodes over the past few years, one area it has kept up its competitive chops has been in advanced packaging. Intel has two main platforms, including EMIB (embedded multi-die interconnect bridge) for 2D packaging, and Foveros, its 3D advanced packaging platform.
Now what
Intel has been turning some heads recently, as disappointments over the last five years or so are now turning into positive updates. Executives have held numerous events outlining how the company remains on track to scale five nodes in four years, and catch up to rivals on advanced processes by 2025.
Moreover, the company recently received a large customer prepayment for its burgeoning foundry services, and CEO Pat Gelsinger hinted the current quarter is tracking above the midpoint of guidance.
It will take more time to confirm if Intel's turnaround is really taking hold. However, U.S.-China tensions, while potentially harming parts of its CPU sales, could have the perverse benefit of quickly boosting Intel's foundry and advanced packaging house. That could fuel Intel's rise as a leading advanced packaging player to take on the East Asian leaders in these fields.
